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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >
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http://hdl.handle.net/10419/26239
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| Title: | | Are income and consumption taxes ever really equivalent?: evidence from a real-effort experiment with real goods  |
| Authors: | | Blumkin, Tomer Ruffle, Bradley J. Ganun, Yosef |
| Issue Date: | | 2008 |
| Series/Report no.: | | CESifo working paper 2194 |
| Abstract: | | The public finance literature demonstrates the equivalence between consumption and labor income (wage) taxes. We construct an environment in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this experimental framework to test whether a labor income tax and an equivalent consumption tax lead to an identical labor-leisure allocation. Despite controlling for subjects work ability and inherent labor-leisure preferences and not allowing for saving, subjects reduce their labor supply significantly more in response to an income tax than they do in response to an equivalent consumption tax. We discuss the economic implications of a policy shift from an income to a consumption tax. |
| Subjects: | | experimental economics tax equivalence income tax consumption tax behavioral economics |
| JEL: | | C91 H22 H24 H31 |
| Document Type: | | Working Paper |
| Appears in Collections: | | CESifo Working Papers, CESifo Group Munich
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