The 1980s' tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labour supply effects. Nevertheless, changing sample composition, aggregate shocks, the changing composition of the tax paying population and discontinuities in the tax system create serious identification and estimation problems. We develop grouping estimators, that address these issues. Our results reveal positive and moderately-sized wage elasticities. We also find negative income effects for women with children.

Authors

Person graphic

Alan Duncan

Richard Blundell
Richard Blundell

CPP Co-Director

Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.

Costas Meghir
Costas Meghir

Research Fellow Yale University

Costas is a Research Fellow of the IFS and a Professor of Economics at Yale University and a Visiting Professor at University College London.

Working Paper details

DOI
10.1920/wp.ifs.1995.9507
Publisher
IFS

Suggested citation

R, Blundell and A, Duncan and C, Meghir. (1995). Estimating labour supply responses using tax reforms. London: IFS. Available at: https://ifs.org.uk/publications/estimating-labour-supply-responses-using-tax-reforms (accessed: 16 April 2024).

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