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|Title:||Are income and consumption taxes ever really equivalent? evidence from a real-effort experiment with real goods |
Ruffle, Bradley J.
|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.|
|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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