Who wins, who loses? Identification of conditional causal effects, and the welfare impact of changing wages

Maximilian Kasy

Journal of Econometrics, 2022, vol. 226, issue 1, 155-170

Abstract: The incidence of tax and other policy changes depends on their impact on equilibrium wages. In a standard model of labor supply, the impact of wage changes on a worker’s welfare equals current labor supply times the induced wage change. Worker heterogeneity implies that wage changes vary across workers. In this context, in order to identify welfare effects one needs to identify the causal effect of policy changes on wages conditional on baseline labor supply and wages.

Keywords: Incidence; Identification; Marginal effects; Local average derivatives (search for similar items in EconPapers)
JEL-codes: C21 H22 J3 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:econom:v:226:y:2022:i:1:p:155-170

DOI: 10.1016/j.jeconom.2021.02.001

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