Labour Supply, Commodity Demand and Marginal Tax Reform

David Madden ()

Economic Journal, 1995, vol. 105, issue 429, 485-97

Abstract: This paper examines the implications of extending the Ahmad-Stern (1984) model of indirect tax reform to include labor supply. The inclusion of labor supply alters the basic measure of marginal revenue cost of indirect taxation and introduces the possibility of calculating a marginal revenue cost for direct taxation. The paper derives the expressions for these revised marginal revenue costs and provides estimates from Irish data. It then examines the sensitivity of the results to assumptions regarding functional form and, in particular, goods/leisure separability. Copyright 1995 by Royal Economic Society.

Date: 1995
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