Validation of structural labor supply model by the elasticity of taxable income

Thor Thoresen and Trine E. Vattø
Additional contact information
Trine E. Vattø: Statistics Norway, https://www.ssb.no/en/forskning/ansatte

Discussion Papers from Statistics Norway, Research Department

Abstract: Given that structural labor supply models continue to play a key role in the process of policy design, it is important to validate their capacity to provide reasonable predictions of alternative hypothetical policy options. Comparing outcomes before and after a realized policy change (such as a tax reform) provides a source of information about behavioral response that can be used to certify the structural labor supply model. The elasticity of taxable income (ETI) measures the response in taxable income to a change in the net-of-tax rate and is a key concept in the quasi-experimental approach. The present paper shows how the ETI methodology can be used to validate predictions from a discrete choice structural labor supply model. Practical guidance is given on how such comparisons can be carried out, and results of these two main methods of obtaining empirical response estimates are contrasted and interpreted.

Keywords: Model validation; Response to tax change; Discrete choice structural labor supply model; Elasticity of taxable income (search for similar items in EconPapers)
JEL-codes: H21 H24 H31 J22 (search for similar items in EconPapers)
Date: 2013-05
New Economics Papers: this item is included in nep-dcm, nep-lab and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.ssb.no/en/nasjonalregnskap-og-konjunkt ... r/_attachment/111362 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ssb:dispap:738

Access Statistics for this paper

More papers in Discussion Papers from Statistics Norway, Research Department P.O.Box 8131 Dep, N-0033 Oslo, Norway. Contact information at EDIRC.
Bibliographic data for series maintained by L Maasø ().