We present an econometrically tractable life cycle labor supply model for panel data including intertemporally progressive taxes on uncertain wage and nonwage incomes. Our two-stage fixed-effects generalized method-of-moments approach first estimates intratemporal and then intertemporal...

By supplementing income explicitly through payments or implicitly through taxes collected, income-based taxes and transfers make disposable income less variable. Because disposable income determines consumption, policies that smooth disposable income also create welfare improving consumption...

A fundamental property of a progressive income tax is that it provides implicit insurance against shocks to income by dampening the variability of disposable income and consumption. The Economic Recovery Tax Act of 1981 (ERTA) in combination with the Tax Reform Act of 1986 (TRA86) greatly...

We examine theoretically and empirically social interactions in labor markets and how policy prescriptions can change dramatically when there are social interactions present.