Labour supply and taxation with restricted choices

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract A model of labour supply is developed in which individuals face restrictions on hours choices. Observed hours reflect both the distribution of preferences and the distribution of offers. In this framework the choice set is limited and observed hours may not appear to satisfy the revealed preference conditions for 'rational' choice. We show first that when the offer distribution is known, preferences can be identified. Terms of use: Documents inWe then show that, where preferences are known, the offer distribution can be fully recovered. We also develop conditions for identification of both preferences and the offer distribution. We illustrate this approach in a labour supply setting with nonlinear budget constraints. The occurrence of non-linearities in the budget constraint can directly reveal restrictions on choices. This framework is then used to study the labour supply choices of a large sample of working age mothers in the UK, accounting for nonlinearities in the tax and welfare benefit system, fixed costs of work and restrictions on hours choices. * We thank seminar participants at Sciences-Po for their comments and the data archive UK and IPUMS for data access.

Bounding the Labor Supply Responses to a Randomized Welfare Experiment: A Revealed Preference Approach

“…Compared to women not on welfare in the quarter (Figure 3c), there is arguably an excess "mound" in the density of earnings below the notch for women on welfare throughout the quarter (Figure 3b). While it is possible to rationalize the absence of bunching with certain distributions of preferences, this evidence is also consistent with the possibility that women face significant labor supply constraints -a conjecture that has received substantial empirical support in related settings (Altonji and Paxson, 1988;Dickens and Lundberg, 1993;Chetty et al, 2011b;Beffy et al, 2014).…”

Time Allocation and Performance: The Case of Chinese Entrepreneurs

“…Others have analysed the self-employment or employment decision (Levesque et al 2002). In addition, there are a number of studies that have proposed a non-linear relationship between hours worked and factors such as taxation and welfare benefits (Chetty 2012), budget constraints (Beffy et al 2014), and restrictions on the number of hours that can be worked (Ham and Reilly 2002).…”

Behavioral responses and welfare reform: Evidence from a randomized experiment

“…Bargain (2006), Brewer, Duncan, Shephard, andSuárez (2006), andGonzález (2008) investigate other welfare reform responses in Europe. Beffy et al (2016) demonstrate the importance of restrictions on offered hours for low-income mothers in the United Kingdom. Mogstad and Pronzato (2012) compare work hours for married and single mothers after welfare reform in Norway.…”