Do Workers Know Where Their Tax Dollars Go?

Karen Conway
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Karen Conway: University of New Hampshire

Eastern Economic Journal, 1995, vol. 21, issue 4, 505-522

Abstract: This research presents a theoretical model that not only allows labor supply to be affected by government spending and taxes, but also permits workers to be aware of the relationship between the two. If individuals value government spending and "know where their taxes are going," wage taxes no longer have the same effect on labor supply as a simple reduction in wages because workers view taxes as "contributions" to public sector goods, which they value. The empirical results for men, using data from the PSID, provide weak support for this "contribution effect."

Keywords: Labor; Supply (search for similar items in EconPapers)
JEL-codes: J22 (search for similar items in EconPapers)
Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:eej:eeconj:v:21:y:1995:i:4:p:505-522

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