Estimating Life Cycle Labor Supply Tax Effects

Posted: 9 Mar 1999

See all articles by James P. Ziliak

James P. Ziliak

University of Kentucky - Department of Economics

Thomas J. Kniesner

Claremont Graduate University - Department of Economic Sciences; Syracuse University - Department of Economics; IZA

Abstract

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 preferences. Specification testing demonstrates the value of incorporating joint progressive taxation of labor and nonlabor incomes. Results for prime-age men emphasize the roles played by hourly wage endogeneity, worker-specific effects, the measure of the rate of pay, and intertemporal budget constraint nonseparability. Simulations indicate that recent tax reforms, while not self-financing, stimulated male labor supplied by about 3 percent and reduced deadweight loss by about 16 percent.

JEL Classification: H21, J22

Suggested Citation

Ziliak, James P. and Kniesner, Thomas J., Estimating Life Cycle Labor Supply Tax Effects. Available at SSRN: https://ssrn.com/abstract=151752

James P. Ziliak

University of Kentucky - Department of Economics ( email )

Lexington, KY 40506
United States

Thomas J. Kniesner (Contact Author)

Claremont Graduate University - Department of Economic Sciences ( email )

Claremont, CA 91711
United States

Syracuse University - Department of Economics ( email )

Syracuse, NY 13244-1020
United States

IZA

P.O. Box 7240
Bonn, D-53072
Germany

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