Public Provision, Commodity Demand and Hours of Work: An Empirical Analysis

30 Pages Posted: 6 Apr 2010

See all articles by Jukka Pirttila

Jukka Pirttila

United Nations - World Institute for Development Economics Research (UNU/WIDER); Tampere University of Technology

Ilpo Suoniemi

Labour Institute for Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: March 2010

Abstract

Atkinson and Stiglitz (Journal of Public Economics 1976) show that when the government has access to non-linear income taxation and consumer preferences are separable between consumption and leisure, there is no need for differentiated commodity taxation. This paper examines the empirical validity of this claim using consumption data from Finland. The data have extensive information on commodity demand, the use of public services and hours of work. When labour income is controlled for in a semi-parametric way, we find that capital income and housing expenses are negatively associated with hours of work, whereas the use of child care is somewhat positively correlated with labour supply. These results suggest that capital income and housing should be taxed whereas day care could perhaps be subsidised.

Keywords: commodity taxation, public provision of private goods, semi-parametric methods

JEL Classification: C14, H21, H42

Suggested Citation

Pirttila, Jukka and Suoniemi, Ilpo, Public Provision, Commodity Demand and Hours of Work: An Empirical Analysis (March 2010). CESifo Working Paper Series No. 3000. Available at SSRN: https://ssrn.com/abstract=1582847

Jukka Pirttila (Contact Author)

United Nations - World Institute for Development Economics Research (UNU/WIDER) ( email )

Katajanokanlaituri 6B
Helsinki, FIN-00160
Finland

Tampere University of Technology ( email )

P.O. 541, Korkeakoulunkatu 8 (Festia building)
Tampere, FI-33101
Finland

Ilpo Suoniemi

Labour Institute for Economic Research ( email )

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