Labor Supply Responses to the 1990s Japanese Tax Reforms

Ken Yamada

Labor Economics Working Papers from East Asian Bureau of Economic Research

Abstract: The consumption-leisure choice model implies that an exogenous change in tax rates will bring about a change in labor supply. This implication is expected to be important to labor supplied by secondary earners under a progressive tax system when spousal income alters effective marginal tax rates. This paper examines labor supply responses to the income tax changes associated with Japanese tax reforms during the 1990s. Empirical specifications are presented in a way that is consistent with a life-cycle model of consumption and labor supply. A simple solution is applied to the sample-selection problem in panel data models with endogenous regressors. The results indicate that the hours-of-work elasticity with respect to the net-of-tax rate is 0.8 for married women.

Keywords: Labor Supply Elasticity; Intertemporal Labor Supply Model; Sample-Selection Correction Model; Quasi-Experiment; Tax Reforms (search for similar items in EconPapers)
JEL-codes: C01 J01 (search for similar items in EconPapers)
Date: 2009-01
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Labor supply responses to the 1990s Japanese tax reforms (2011)
Working Paper: Labor Supply Responses to the 1990s Japanese Tax Reforms (2009)
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