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Labor Supply When Tax Avoidance Matters

Jonas Agell, Mats Persson and Hans Sacklén
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Hans Sacklén: Trade Union Institute for Economic Research, Postal: FIEF, Wallingatan 38, SE-111 24 Stockholm, Sweden

No 157, Working Paper Series from Trade Union Institute for Economic Research

Abstract: We examine how tax avoidance in the form of trade in well-functioning asset markets affects the empirical study of labor supply. We discuss the implications for tax policy analysis, and we show that a failure to account for avoidance responses may lead to huge errors when predicting how tax reform affects labor supply, tax revenue, and the welfare cost of taxation. In conclusion we argue that our model may explain a number of otherwise hard to understand dimensions of tax payer response.

Keywords: Labour supply; Tax avoidance; Asset markets; Tax reform simulation (search for similar items in EconPapers)
JEL-codes: H31 J22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1999-09-28
New Economics Papers: this item is included in nep-lab and nep-pbe
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Published in European Journal of Political Economy, 2004, pages 963-982.

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