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http://hdl.handle.net/10419/45983
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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: | | 2010 |
| Series/Report no.: | | Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5145 |
| Abstract: | | The public finance literature demonstrates the equivalence between consumption and laborincome (wage) taxes. We introduce an experimental paradigm in which individuals make real labor-leisure choices and spend their earned income on real goods. We use this paradigm to test whether a labor-income tax and an equivalent consumption tax lead to identical laborleisure allocations. Despite controlling for subjects' work ability and inherent labor-leisure preferences and disallowing saving, subjects reduce their labor supply significantly more in response to an income tax than to an equivalent consumption tax. We discuss the economic implications of a policy shift to a consumption tax. |
| Subjects: | | experimental economics tax equivalence income tax consumption tax behavioral economics |
| JEL: | | C91 H22 H31 |
| Persistent Identifier of the first edition: | | urn:nbn:de:101:1-201010133312 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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