Resource title

Are income and consumption taxes ever really equivalent?: evidence from a real-effort experiment with real goods

Resource image

image for OpenScout resource :: Are income and consumption taxes ever really equivalent?: evidence from a real-effort experiment with real goods

Resource description

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.

Resource author

Tomer Blumkin, Bradley J. Ruffle, Yosef Ganun

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/26239

Resource license

Adapt according to the presented license agreement and reference the original author.