Effects of an Income Tax on Labor Supply.

by Marvin H. Kosters

Purchase Print Copy

 FormatList Price Price
Add to Cart Paperback32 pages $20.00 $16.00 20% Web Discount

An analysis of the effects of an income tax on labor supply and welfare using highly simplified models. The analysis is intended (1) to point out the kinds of labor supply parameters on which changes in labor supply depend when alternative tax changes are considered and (2) to assemble evidence on the welfare cost of an income tax. The evidence on compensated wage rate effects was obtained by studying the dimensions of labor supply for three components of the labor force: (1) hours of work for males; (2) labor force participation rates for males; (3) labor force participation of married women. Although the effect on the allocation of time of a relative price distortion at the labor-leisure margin appears to be very small--except perhaps as it affects the labor force behavior of married women--an income tax can affect consumption-savings decisions as well as the allocation of labor among different kinds of employment.

This report is part of the RAND Corporation Paper series. The paper was a product of the RAND Corporation from 1948 to 2003 that captured speeches, memorials, and derivative research, usually prepared on authors' own time and meant to be the scholarly or scientific contribution of individual authors to their professional fields. Papers were less formal than reports and did not require rigorous peer review.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.