Taxes and Labor Supply: Portugal, Europe, and the United States (Conference Version)
FEUNL Working Paper Series No. 560
26 Pages Posted: 26 Jan 2012
Date Written: November 26, 2005
I relate hours worked with taxes on consumption and labor. I propose a model and compare its predictions for Portugal, France, Spain, United Kingdom and United States. Hours per worker in Portugal decreased from 35.1 in 1986 to 32.6 in 2001. With only the parameters and the taxes for Portugal, the model predicts the 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 able to explain the trend in hours with only the changes in taxes.
Keywords: labor supply, consumption tax, labor income tax
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