TY - JOUR
T1 - Micro and macro elasticities in a life cycle model with taxes
AU - Rogerson, Richard
AU - Wallenius, Johanna
N1 - Funding Information:
✩ We thank Ed Prescott, Martin Evans, Nobu Kiyotaki, Fernando Alvarez, Robert Hall, Manuel Arrellano, Robert Shimer and two anonymous referees for useful comments, as well as many seminar and conference participants. Rogerson thanks the NSF for financial support, and Wallenius thanks the Yrjo Jahnsson Foundation for financial support. * Corresponding author. Fax: +1 480 965 0748. E-mail address: [email protected] (R. Rogerson).
PY - 2009/11
Y1 - 2009/11
N2 - We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of work. Moreover, we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers. In our model, micro and macro elasticities are effectively unrelated. Our model is also consistent with other cross-country patterns.
AB - We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of work. Moreover, we find that there is no inconsistency between this result and the empirical finding of small labor elasticities for prime age workers. In our model, micro and macro elasticities are effectively unrelated. Our model is also consistent with other cross-country patterns.
KW - Labor supply
KW - Life cycle
KW - Taxes
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U2 - 10.1016/j.jet.2008.05.011
DO - 10.1016/j.jet.2008.05.011
M3 - Article
AN - SCOPUS:65949107702
SN - 0022-0531
VL - 144
SP - 2277
EP - 2292
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 6
ER -