A simulation-based welfare loss calculation for labor taxes with piecewise-linear budgets

• 成果类型: Article
• 署名作者: Fullerton, D; Gan, L
• 署名单位: University of Texas System; University of Texas Austin
• 刊物名称: JOURNAL OF PUBLIC ECONOMICS
• ISSN/ISSBN: 0047-2727
• DOI: 10.1016/j.jpubeco.2003.09.006
• 发表日期: 2004
• 页码: 2339-2359
• 关键词: simulation-based welfare loss calculation; labor taxes; piecewise-linear budgets

摘要

Graduated income tax rates and transfer programs create piecewise-linear budget constraints that consist of budget segments and kink points. With any change in these tax rules, each individual may switch between a kink point and a budget segment, between two budget segments, or between two kink points. With errors in the estimated labor supply equation, the new choice is uncertain, and so the welfare effects of a tax change are uncertain. We propose a simulation-based method to compute expected welfare effects that is easy to implement and that fully accounts for uncertainties about choices around kink points. Our method also provides information about expected changes in working hours. (C) 2003 Elsevier B.V. All rights reserved.