Economic theory assumes that taxpayers use their true marginal tax rate (MTR) to guide their economic decisions. However, complexity of the personal income tax system implies that taxpayers may incorrectly perceive true marginal prices and incentives. We first develop an updating model that...

This paper examines the response of husbands' and wives' earnings to a tax reform in which husbands' and wives' tax rates changed independently, allowing me to examine the effect of both spouses' incentives on each spouse's behavior. I compare the results to those of more simplified econometric...

When the labour supply is elastic with respect to the net wage, labour income taxation generates economic distortion and welfare loss. The substitute effect is a key determinant of the magnitude of such deadweight loss; thus, evaluating the elasticity of the labour supply has broad and...

When he labor supply is elastic with respect to the net wage rate, labor income taxation generates economic distortion and welfare loss. The substitute effect is a key determinant of the magnitude of such deadweight loss; thus, evaluating the elasticity of the labor supply has broad and...

With many countries considering the adoption of a system of earned income tax credits, it is useful to analyze how different types of credits affect labor supply and earnings. This paper focuses on a 1999 reform to the UK tax credit system, which increased the value of the credit and reduced the...

Analyzing a homogenous household setting with endogenous fertility and endogenous labor supply, we demonstrate that moving from joint taxation to individual taxation and adapting child benefits so as to keep fertility constant entails a Pareto improvement. The change is associated with an...

This paper examines the response of husbands' and wives' earnings to a tax reform in which husbands' and wives' tax rates changed independently, allowing me to examine the effect of both spouses' incentives on each spouse's behavior. I compare the results to those of more simplified econometric...

The tax simulation studies in Japan have necessarily relied on arbitrary sets of preference parameters due to the paucity of the empirical estimates. Motivated by this state of the art, we estimate the labor supply function and preference parameters for Japanese prime-age males, allowing for the...

There is still considerable dispute about the magnitude of labor supply elasticities. While differences in micro and macro estimates are recently attributed to frictions and adjustment costs, we show that relatively low labor supply elasticities derived from microeconometric models can also be...

It has been suggested in the literature that taxes and subsidies play an important role in explaining the differences in working hours across countries. In this paper I test whether public programmes for family support play a role in explaining this variation. I analyse two types of policies:...