The marginal cost of public funds: Hours of work versus labor force participation

• 成果类型: Article
• 署名作者: Kleven, Henrik Jacobsen; Kreiner, Claus Thustrup
• 署名单位: University of Copenhagen
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2006.03.006
• 发表日期: 2006
• 页码: 1955-1973
• 关键词: taxation; labor supply; marginal welfare costs

摘要

This paper extends the theory and measurement of the marginal cost of public funds (MCF) to account for labor force participation responses. Our work is motivated by the emerging consensus in the empirical literature that extensive (participation) responses are more important than intensive (hours of work) responses. In the modelling of extensive responses, we argue that it is crucial to account for the presence of non-convexities created by fixed work costs. In a non-convex framework, tax and transfer reforms give rise to discrete participation responses generating first-order effects on government revenue. These revenue effects make the marginal cost of funds higher and we show numerically that the implications for MCF tend to be substantial. (c) 2006 Elsevier B.V. All rights reserved.