Taxes and Labor Supply: Portugal, Europe, and the United States
Posted: 1 Oct 2008
Date Written: August 1, 2008
I relate hours worked with taxes on consumption and labor for Portugal, France, Spain, United Kingdom and United States. From 1986 to 2001, hours per worker in Portugal decreased from 35.1 to 32.6. With the parameters for Portugal, the model predicts hours worked in 2001 with an error of only 12 minutes from the actual hours. Across countries, most predictions differ from the data by one hour or less. The model is not sensible to special assumptions on the parameters. I calculate the long run effects of taxes on consumption, hours, capital and welfare for Portugal. I extend the model to discuss implications for Social Security. I discuss the steady state and the transition from a pay-as-you-go to a fully funded system.
Keywords: labor supply, consumption tax, labor income tax, welfare, Social Security
JEL Classification: E6, H3
Suggested Citation: Suggested Citation