Distortionary Taxation and Labor Supply: Evidence from Canada

Emanuela Cardia (), Norma KOZHAYA and Francisco J. Ruge-Murcia ()

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: This paper examines empirically the effects of distortionary taxation on labor supply using a general equilibrium framework. The long-term relations predicted by the model are derived and tested using Canadian data between 1966 and 1993. While the cointegrating predictions of the model without taxation are rejected, the ones of the model with labor taxation are not. Persistent labor tax rate increases appear to play an important role in the observed downward trend in hours worked.

Keywords: labor taxation; labor suly; cointegration; Canada (search for similar items in EconPapers)
JEL-codes: J20 H21 H20 (search for similar items in EconPapers)
Date: 1999

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Persistent link: http://EconPapers.repec.org/RePEc:mtl:montde:9913

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