Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/85761 
Year of Publication: 
2003
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 03-065/1
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
Tax Liability Side Equivalence (tax LSE) claims that the statutory incidence of a tax is irrelevant for its economic incidence. In gift-exchange labor markets, firms provide a gift to workers by paying high wages, and workers reciprocate by providing high efforts. Tax LSE is theoretically predicted to hold in gift-exchange markets if workers' effort choices exclusively depend on the net wage, but breaks down if they partially depend on the gross wage paid to workers. We experimentally test tax LSE in a gift-exchange market and find that it holds surprisingly well.
Subjects: 
Tax incidence
Efficiency wages
Gift exchange
Experiments
JEL: 
C92
H22
J41
Document Type: 
Working Paper

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