Estimating the Welfare Cost of Taxation in a Labour Market with Unemployment and Non-Participation

Vincent Hogan ()

Working Papers from College Dublin, Department of Political Economy-

Abstract: The standard public finance analysis of the welfare cost of labour income taxation is based on the estimation of labour supply functions that treat unemployed individuals as non-participants. This paper applies econometric models of multinomial discrete choice to the labour market, explicitly allowing individuals to be in any of three possible states (employment, unemployment and non-participation). Based on these estimates, we present calculations of the dead-weight loss of taxes, which turn out to be much larger than the loss suggested by the standard literature.

Keywords: LABOUR MARKET; UNEMPLOYMENT; TAXATION; REGRESSION ANALYSIS (search for similar items in EconPapers)
JEL-codes: C35 H2 J64 J68 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1999
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Working Paper: Estimating the welfare cost of taxation in a labour market with Unemployment and non-participation (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:dublec:99/2

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