What is it about?
We present a unified interpretation of prior empirical work on labor supply. Based on this analysis, we argue that work effort is much more responsive to wages and taxes than the conventional wisdom in the economics profession would suggest.
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Why is it important?
Greater responsiveness of hours of work to taxes implies that the optimal tax rate on labor earnings is lower than prior work would suggest.
Perspectives
For many years there has been a controversy in the economics profession over labor supply elasticities - with many macro economists arguing they are higher than most micro economists believe. I think it was very useful to have a micro and macro economist come together to try to sort through this confusion.
Professor Michael P Keane
University of Oxford
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This page is a summary of: Reconciling Micro and Macro Labor Supply Elasticities: A Structural Perspective, Annual Review of Economics, August 2015, Annual Reviews,
DOI: 10.1146/annurev-economics-080614-115601.
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