Ricardian Equivalence with Wage-Rate Uncertainty

Dean Croushore

Journal of Money, Credit and Banking, 1996, vol. 28, issue 3, 279-93

Abstract: This paper examines Ricardian equivalence when the wage rate is uncertain and people choose their labor supply. The author reviews the model of Robert B. Barsky, Gregory Mankiw, and Stephen P. Zeldes (1986) and shows that their finding of a positive marginal propensity to consume out of a tax cut is due to the insurance aspect of distortionary taxation. Then the author explores the trade-off between this insurance aspect and labor-supply distortions in the context of a model similar to that of Barsky, Mankiw, and Zeldes but incorporating labor supply. Copyright 1996 by Ohio State University Press.

Date: 1996
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Working Paper: Ricardian equivalence with wage-rate uncertainty (1993)
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:28:y:1996:i:3:p:279-93

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