IDEAS home Printed from https://ideas.repec.org/p/ucn/wpaper/199902.html
   My bibliography  Save this paper

Estimating the welfare cost of taxation in a labour market with Unemployment and non-participation

Author

Listed:
  • Vincent (Vincent Peter) Hogan

Abstract

The standard public finance analysis of the welfare cost of labour income taxation is based on the estimation of labour supply functions that treat unemployed individuals as non-participants. This paper applies econometric models of multinomial discrete choice to the labour market, explicitly allowing individuals to be in any of three possible states (employment, unemployment and non-participation). Based on these estimates, we present calculations of the dead-weight loss of taxes, which turn out to be much larger than those suggested by the standard literature.

Suggested Citation

  • Vincent (Vincent Peter) Hogan, 1999. "Estimating the welfare cost of taxation in a labour market with Unemployment and non-participation," Working Papers 199902, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:199902
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10197/912
    File Function: First version, 1999
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. John C. Ham, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(3), pages 335-354.
    2. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-130, January.
    3. Stephen R. G. Jones & W. Craig Riddell, 1999. "The Measurement of Unemployment: An Empirical Approach," Econometrica, Econometric Society, vol. 67(1), pages 147-162, January.
    4. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(1), pages 225-238.
    5. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
    6. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-799, July.
    7. Blomquist, Soren, 1995. "Restrictions in labor supply estimation: Is the MaCurdy critique correct?," Economics Letters, Elsevier, vol. 47(3-4), pages 229-235, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hogan, Vincent, 2004. "The welfare cost of taxation in a labour market with unemployment and non-participation," Labour Economics, Elsevier, vol. 11(4), pages 395-413, August.
    2. Hans G. Bloemen & Arie Kapteyn, 2008. "The estimation of utility-consistent labor supply models by means of simulated scores," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 395-422.
    3. Smith Conway, Karen & Kimmel, Jean, 1998. "Male labor supply estimates and the decision to moonlight," Labour Economics, Elsevier, vol. 5(2), pages 135-166, June.
    4. Beznoska, Martin, 2014. "Estimating a consumer demand system of energy, mobility and leisure: A microdata approach for Germany," Discussion Papers 2014/8, Free University Berlin, School of Business & Economics.
    5. Yun, Myeong-Su, 1999. "Generalized Selection Bias and The Decomposition of Wage Differentials," IZA Discussion Papers 69, Institute of Labor Economics (IZA).
    6. Hu, Yingyao, 2017. "The Econometrics of Unobservables -- Latent Variable and Measurement Error Models and Their Applications in Empirical Industrial Organization and Labor Economics [The Econometrics of Unobservables]," Economics Working Paper Archive 64578, The Johns Hopkins University,Department of Economics, revised 2021.
    7. Alejandra Mizala & Pilar Romaguera & Paulo Henríquez, 1998. "Oferta laboral y seguro de desempleo: Estimaciones para la economía chilena," Documentos de Trabajo 28, Centro de Economía Aplicada, Universidad de Chile.
    8. Paul Gertler & Roland Sturm & Bruce Davidson, 1994. "Information and the Demand for Supplemental Medicare Insurance," NBER Working Papers 4700, National Bureau of Economic Research, Inc.
    9. repec:hal:spmain:info:hdl:2441/f6h8764enu2lskk9p2m9mgp8l is not listed on IDEAS
    10. Martinez-Granado, Maite, 2005. "Testing labour supply and hours constraints," Labour Economics, Elsevier, vol. 12(3), pages 321-343, June.
    11. Shelley A. Phipps, 1990. "The Impact of the Unemployment Insurance Reform of 1990 on Single Earners," Canadian Public Policy, University of Toronto Press, vol. 16(3), pages 252-261, September.
    12. Geert Dhaene & Koen Jochmans, 2015. "Split-panel Jackknife Estimation of Fixed-effect Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(3), pages 991-1030.
    13. Eissa, Nada & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup, 2008. "Evaluation of four tax reforms in the United States: Labor supply and welfare effects for single mothers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 795-816, April.
    14. Seonho Shin, 2021. "Were they a shock or an opportunity?: The heterogeneous impacts of the 9/11 attacks on refugees as job seekers—a nonlinear multi-level approach," Empirical Economics, Springer, vol. 61(5), pages 2827-2864, November.
    15. Massimiliano Bratti & Alfonso Miranda, 2011. "Endogenous treatment effects for count data models with endogenous participation or sample selection," Health Economics, John Wiley & Sons, Ltd., vol. 20(9), pages 1090-1109, September.
    16. Farsi, Mehdi, 2010. "Risk aversion and willingness to pay for energy efficient systems in rental apartments," Energy Policy, Elsevier, vol. 38(6), pages 3078-3088, June.
    17. Carlin, Paul S. & Flood, Lennart, 1997. "Do children affect the labor supply of Swedish men? Time diary vs. survey data," Labour Economics, Elsevier, vol. 4(2), pages 167-183, June.
    18. Müller, Kai-Uwe, 2014. "Analyzing economic policies that affect supply and demand: a structural model of productivity, labor supply and rationing," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100471, Verein für Socialpolitik / German Economic Association.
    19. Patricia Cortés & Jessica Pan, 2013. "Outsourcing Household Production: Foreign Domestic Workers and Native Labor Supply in Hong Kong," Journal of Labor Economics, University of Chicago Press, vol. 31(2), pages 327-371.
    20. repec:spo:wpmain:info:hdl:2441/f6h8764enu2lskk9p2m9mgp8l is not listed on IDEAS
    21. Dimitris Christelis & Raquel Fonseca, 2015. "Labor Market Policies and Self-Employment Transitions of Older Workers," Cahiers de recherche 1516, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    22. Atallah, Gamal, 1998. "Les impôts sur le revenu et l’offre de travail des femmes mariées : une revue de la littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(1), pages 95-128, mars.

    More about this item

    Keywords

    Labor market--Econometric models; Taxation; Unemployment;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucn:wpaper:199902. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nicolas Clifton (email available below). General contact details of provider: https://edirc.repec.org/data/educdie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.