Taxes and labor supply: Portugal, Europe, and the United States

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Abstract

I relate hours worked with taxes on consumption and labor for Portugal, France, Spain, United Kingdom and United States. From 1986 to 2001, hours per worker in Portugal decreased from 35.1 to 32.6. With the parameters for Portugal, the model predicts hours worked in 2001 with an error of only 12 min from the actual hours. Across countries, most predictions differ from the data by 1 h or less. The model is not sensible to special assumptions on the parameters. I calculate the long run effects of taxes on consumption, hours, capital and welfare for Portugal. I extend the model to discuss implications for Social Security. I discuss the steady state and the transition from a pay-as-you-go to a fully funded system.

Original languageEnglish
Pages (from-to)101-124
Number of pages24
JournalPortuguese Economic Journal
Volume7
Issue number2
DOIs
Publication statusPublished - 2008

Keywords

  • Consumption tax
  • Labor income tax
  • Labor supply
  • Social security
  • Welfare

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