Skip to main content

Advertisement

SpringerLink
Log in

Comparing inequality aversion across countries when labor supply responses differ

  • Published:
International Tax and Public Finance Aims and scope Submit manuscript

Abstract

We analyze to which extent social inequality aversion differs across nations when controlling for actual country differences in labor supply responses. Towards this aim, we estimate labor supply elasticities at both extensive and intensive margins for 17 EU countries and the US. Using the same data, inequality aversion is measured as the degree of redistribution implicit in current tax-benefit systems, when these systems are deemed optimal. We find relatively small differences in labor supply elasticities across countries. However, this changes the cross-country ranking in inequality aversion compared to scenarios following the standard approach of using uniform elasticities. Differences in redistributive views are significant between three groups of nations. Labor supply responses are systematically larger at the extensive margin and often larger for the lowest earnings groups, exacerbating the implicit Rawlsian views for countries with traditional social assistance programs. Given the possibility that labor supply responsiveness was underestimated at the time these programs were implemented, we show that such wrong perceptions would lead to less pronounced and much more similar levels of inequality aversion.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Notes

  1. That is, we obtain partial orderings. For instance, we can say that the French, Irish and UK systems are significantly “more Rawlsian” than the US system and less redistributive than the Swedish one. Yet we cannot conclude that inequality aversion is higher in France than in the UK or Ireland.

  2. Note that like many, we improperly use the term “Rawlsian” throughout the paper. Maximizing utility of the worst off person in the society is not the original version of Rawls (1972) but a kind of welfarist version of Rawls, as explained in Kanbur et al. (2006).

  3. The present paper differs from its ancestor, Bargain and Spadaro (2008), and a follow-up available as Spadaro (2008), in several ways. Importantly, the present study integrates optimal tax analysis with labor supply estimation and we cover a much larger set of countries. Therefore, conclusions are simply different.

  4. Some studies elicit people’s attitude towards inequality using survey data (see e.g. Fong 2001; Corneo and Grüner 2002, or Isaksson and Lindskog 2009). Tax preferences obtained in surveys have also be compared with actual tax schedules (Singhal 2008). In behavioral economics, experiments are often used to assess preferences of a group (see for instance Fehr and Schmidt 1999). With the well-known ‘leaky bucket’ experiment, respondents are able to transfer money from a rich individual to a poor one but incur a loss of money in the process, so that the equity-efficiency trade-off is taken into account in measuring tastes for redistribution (see for instance Amiel et al. 1999); in recent experiments, participants have voted for alternative tax structures (e.g. Ackert et al. 2007). Finally, in the public economic literature, implicit value judgments may be drawn from inequality measures, assuming a natural rate of subjective inequality (see Lambert et al. 2003; Duclos 2000).

  5. It would certainly be interesting to extend the present approach to some explicit political economy model (see Castanheira et al. 2012, for a survey and empirical assessment), despite basic representations such as the median voter hypothesis being of limited applicability (cf. Alesina and Giuliano 2011). Many dimensions are involved in the case of tax-benefit policy design in the real world, including other institutions (e.g. labor market policies, as noted above), various actors (workers, unions, lobbies), and the role of expert and international influences (cf. Banks et al. 2005), which are often not accounted for by theory. Furthermore, social choice models in presence of endogenous labor supply are rare.

  6. Note that \(\frac{T_{i}-T_{i-1}}{C_{i}-C_{i-1}}\) corresponds to \(\frac{T_{i}^{\prime}}{1-T_{i}^{\prime}}\) in the standard formulation of optimal tax rules, with \(T_{i}^{\prime}=\frac{T_{i}-T_{i-1}}{Y_{i}-Y_{i-1}}\) the effective marginal tax rate (EMTR) faced by group i.

  7. Utility functions are not directly specified in Saez’s model. Yet, the weights g i comprise the derivative of the implicit social welfare function (integrated over all the workers within group i) and the individuals’ marginal utility of income. Utility functions are, however, necessary for the estimation of elasticities. For this, we choose a flexible functional form (see Sect. 4). The condition of zero income effects is not imposed a priori, but rather checked a posteriori. We find small or insignificant effects, therefore this assumption is acceptable as a first approximation (see Appendix II).

  8. Due to the inversion procedure above we do not need to calculate elasticities for group 0—there is no such elasticity according to definitions in Eqs. (2), (3). In fact, the definition of the extensive/intensive elasticity for group 1 η 1 (= ζ 1) can be interpreted as the decrease in h 1 due to a move to group 0 by workers when C 1−C 0 decreases, or alternatively as the response by non-workers (a move to group 1) when C 1−C 0 increases. This reverse response is entirely determined by normalization (4), i.e. simple algebra leads to:

    $$\frac{C_{1}-C_{0}}{h_{0}}\frac{\partial h_{0}}{\partial(C_{1}-C_{0})}=-\frac{h_{1}g_{1}}{h_{0}g_{0}} \eta_{1}. $$

    It does not mean that groups 0 and 1 are similar in terms of labor supply preferences, simply that only one Saez elasticity (here η 1) is required to capture inter-group moves for these two groups.

  9. Of course, there are different views on what social inequality aversion really is—as, e.g., discussed by Lambert et al. (2003). We rely here on a parameter γ capturing the concavity of the social welfare function, as parameterized by Saez (2002, p. 1058).

  10. The present characterization could be based on alternative social objective functions. Kanbur and Tuomala (2011) have recently clarified the interrelationships between various types of social objectives, including some with sharp discontinuity at the poverty line (charitable conservatism and poverty radicalism) and less angular versions such as usual constant elasticity inequality aversion (as the measure γ used here) and the “slow, quick, slow” empirical property of the Gini weights. Notice, however, that it follows from the discrete form of the social welfare function used in the Saez optimal tax model that we do not impose any restriction on the shape of the marginal social welfare weights (and hence allow for any discontinuities, as those present in charitable conservatism, for instance). We only impose a constant elasticity inequality aversion in Eq. (5), i.e. to derive a single-valued approximation of redistributive tastes in each country for the purpose of international comparisons. It could be interesting to replicate our analysis with non-welfarist objectives (e.g. Kanbur et al. 2006) or welfare measures that preserve individual heterogeneity (see Fleurbaey 2008).

  11. Simulated disposable incomes are used in place of self-reported incomes for two reasons. First, they give a better rending of the redistributive intention of the social planner. Indeed, actual (and self-reported) levels of taxes or benefits are affected by non-intended behavior such as the low take-up rate of some benefits. Second, simulated incomes are also consistent with the need to simulate counterfactual disposable incomes for all options of hours worked in order to estimate the labor supply model.

  12. An introduction to EUROMOD, a descriptive analysis of taxes and transfers in the EU countries and robustness checks are provided by Sutherland (2001). EUROMOD has been used in several empirical studies, notably in the comparison of European welfare regimes by Immervoll et al. (2007).

  13. Note that appendices with roman numbers are directly attached to this document while appendices starting with capital letters are part of an independent document.

  14. Note that we make use of those policy years available in EUROMOD at the time of writing (1998, 2001 or 2005). For comparison, we use TAXSIM simulations for the year 2005.

  15. Blundell et al. (2009) focus instead on single mothers. In our case, samples of single parents in some countries are too small for meaningful results. Focusing on one homogeneous group at a time implicitly assumes some separability in the social planner’s program, with a first stage of redistribution between demographic groups and a second stage with vertical redistribution within homogeneous groups (see Bourguignon and Spadaro 2012).

  16. Non-contributory social transfers and contributory UB are described in the Appendix (part D and E). Appendix F provides an extensive sensitivity analysis on the treatment of UB recipients.

  17. We calibrate uniform changes in disposable income at the individual level to obtain percent changes in income gaps, as defined in (2) and (3). Total responses, measured as a change in the population shares in each income group, are then obtained by aggregation to calculate η i and ζ i for i=1,…,I (see also Blundell et al. 2009).

  18. Interesting exceptions are France, Finland and Denmark, i.e. countries where social assistance programs generated high effective marginal tax rates for the lowest income levels in the years under study. Marginal changes in income differentials d(C i −C 0) used to calculate elasticities therefore have a small impact on labor supply for them. As discussed in Sect. 3, the fact that elasticities are endogenous to current tax-benefit systems is not an issue since these systems are deemed optimal in our characterization. That is, our characterization of social inequality aversion for these three countries incorporates confiscatory (implicit) taxation being imposed on the working poor.

  19. Estimates are generally relatively precise, yet 95 % confidence bounds are as broad as 0.4–0.8 for Italy or 0.2–0.5 for Ireland. As shown below, this affects the international comparability of tax-benefit revealed social inequality aversion.

  20. International heterogeneity in the degree of redistribution is not affected by the treatment of unemployment benefits (UB), i.e. whether they are counted as part of the redistribution function or market income (according to a pure insurance mechanism). Countries that do not redistribute much among childless single individuals do not redistribute much in general (see Fig. E.2. in Appendix E). This suggests that redistribution among this group is representative of overall international differences in tastes for vertical equity, confirming that we can conduct the analysis on single individuals.

  21. We focus on the extensive margin because results for the key groups 0 and 1 depend less crucially on the intensive margin (cf. Saez 2002). Note also that we take the mean inequality aversion over the two periods when two years of data are available, in order not to overload the graphs.

  22. In the context of the US and the UK, Piketty and Saez (2013) argue that governments retargeted transfers from groups unable to work to beneficiaries who were potentially able to work. This trend has led to a shift from traditional means-tested social assistance programs toward in-work benefits. This policy adjustment to the moral hazard problem attached to traditional demogrant policies can be seen as a revision of beliefs about labor supply responses and/or a change in social preferences (social welfare weights on non-workers fall relative to those on low income workers, as society believes that a majority of the former can actually work). It is probably impossible to differentiate between these two aspects (i.e. it is equivalent to say that the society reassesses labor supply responses upwards or increasingly favors desert-sensitive policies). As discussed in Sect. 2, we do not attempt to explain how social preferences are formed and why they change—yet it is interesting to underscore the political economy forces at play and the possible role of international influence, with some noticeable convergence across countries on the principle of “making work pay” (see Banks et al. 2005).

  23. Since “working poor” is an imprecisely defined concept, we suggest simply taking (1+x) times the minimum wage (full-time equivalent income) as the upper bound for the income of that group, rather than fixing an arbitrary poverty line. We are thus able to adopt institutional definitions of working poverty (e.g. individualized earned income tax credits targeted at the working poor in France and Belgium in the early 2000s relied on such a definition with x=30 %, which we adopt here). We use official or implicit national minimum wages as reported by the OECD (Immervoll 2007). Groups 2 to 5 are then defined in proportion to the median income, in order to consistently account for the income distributions of each country. The upper income bounds for groups 2–4 are 1, 1.5 and 4 times the median income, respectively.

References

  • Aaberge, R., Colombino, U., & Wennemo, T. (2002). Heterogeneity in the elasticity of labor supply in Italy and some policy implications. CHILD Working Paper No. 21/2002.

  • Acemoglu, D., Golosov, M., & Tsyvinski, A. (2010). Dynamic Mirrlees taxation under political economy constraints. Review of Economic Studies, 77(3), 841–881.

    Article  Google Scholar 

  • Ackert, L. F., Martinez-Vazquez, J., & Rider, M. (2007). Social preferences and tax policy design: some experimental evidence. Economic Inquiry, 45(3), 487–501.

    Article  Google Scholar 

  • Ahmad, E., & Stern, N. (1984). The theory of reform and Indian indirect taxes. Journal of Public Economics, 25, 259–298.

    Article  Google Scholar 

  • Alesina, A., & Giuliano, P. (2011). Preferences for Redistribution. In J. Benhabib, M. O. Jackson, & A. Bisin (Eds.), Handbook of social economics (Vol. 1B, pp. 93–132). Amsterdam: Elsevier.

    Google Scholar 

  • Amiel, Y., Creedy, J., & Hurn, S. (1999). Measuring attitudes towards inequality. Scandinavian Journal of Economics, 101, 83–96.

    Article  Google Scholar 

  • Banks, J., Disney, R., Duncan, A., & Van Reenen, J. (2005). The internationalisation of public welfare policy. The Economic Journal, 115, C62–C8.

    Article  Google Scholar 

  • Bargain, O., & Spadaro, A. (2008). Optimal taxation, social contract and the four worlds of welfare capitalism. UCD School Of Economics, Working Papers No. 200816.

  • Bargain, O., Orsini, K., & Peichl, A. (2012). Comparing labor supply elasticities in Europe and the US: new results. IZA Discussion Paper 6735.

  • Blundell, R., & MaCurdy, T. (1999). Labor supply: a review of alternative approaches. In O. Ashenfelter & D. Card (Eds.), Handbook of labor economics (Vol. 3A, pp. 1559–1695). Amsterdam: Elsevier.

    Google Scholar 

  • Blundell, R. W., Duncan, A., McCrae, J., & Meghir, C. (2000). The labour market impact of the working families’ tax credit. Fiscal Studies, 21(1), 75–103.

    Article  Google Scholar 

  • Blundell, R., Brewer, M., Haan, P., & Shephard, A. (2009). Optimal income taxation of lone mothers: an empirical comparison of the UK and Germany. The Economic Journal, 119(535), F101–F121.

    Article  Google Scholar 

  • Bourguignon, F., & Spadaro, A. (2012). Tax-benefit revealed social preferences. The Journal of Economic Inequality, 10(1), 75–108.

    Article  Google Scholar 

  • Callan, T., van Soest, A., & Walsh, J. (2009). Tax structure and female labor supply: evidence from Ireland. Labour, 23(1), 1–35.

    Article  Google Scholar 

  • Castanheira, M., Nicodème, G., & Profeta, P. (2012). On the political economics of tax reforms: survey and empirical assessment. International Tax and Public Finance, 19, 598–624.

    Article  Google Scholar 

  • Christiansen, V., & Jansen, E. S. (1978). Implicit social preferences in the Norwegian system of indirect taxation. Journal of Public Economics, 10, 217–245.

    Article  Google Scholar 

  • Coughlin, P. J. (1992). Probabilistic voting theory. Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Corneo, G., & Grüner, H. P. (2002). Individual preferences for political redistribution. Journal of Public Economics, 83(1), 83–107.

    Article  Google Scholar 

  • Decoster, A., & Schokkaert, E. (1989). Equity and efficiency of a reform of Belgian indirect taxes. Recherches Economiques de Louvain, 55(2), 155–176.

    Google Scholar 

  • Diamond, P. (1980). Income taxation with fixed hours of work. Journal of Public Economics, 13(1), 101–110.

    Article  Google Scholar 

  • Duclos, J.-Y. (2000). Gini indices and the redistribution of income. International Tax and Public Finance, 7, 141–162.

    Article  Google Scholar 

  • Eissa, N., & Liebman, J. B. (1996). Labor supply response to the earned income tax credit. The Quarterly Journal of Economics, 111(2), 605–637.

    Article  Google Scholar 

  • Eissa, N., & Hoynes, H. (2011). Redistribution and tax expenditures: the earned income tax credit. National Tax Journal, 64 (2, Part 2), 689–730.

    Google Scholar 

  • Eissa, N., Kleven, H. J., & Kreiner, C. T. (2008). Evaluation of four tax reforms in the United States: labor supply and welfare effects for single mothers. Journal of Public Economics, 92, 795–816.

    Article  Google Scholar 

  • Feenberg, D., & Coutts, E. (1993). An introduction to the TAXSIM model. Journal of Policy Analysis and Management, 12(1), 189–194.

    Article  Google Scholar 

  • Fehr, E., & Schmidt, K. M. (1999). A theory of fairness, competition and cooperation. The Quarterly Journal of Economics, 114, 817–868.

    Article  Google Scholar 

  • Fleurbaey, M. (2008). Fairness, responsibility and welfare. Oxford: Oxford University Press.

    Google Scholar 

  • Fong, C. (2001). Social preferences, self-interest, and the demand for redistribution. Journal of Public Economics, 82(2), 225–246.

    Article  Google Scholar 

  • Gordon, R. H., & Cullen, J. B. (2011). Income redistribution in a Federal system of governments. The Journal of Public Economics, 96(11–12), 1100–1109.

    Google Scholar 

  • Haan, P., & Steiner, V. (2006). Labor market effects of the German tax reform 2000. In C. Dreger, H. P. Galler, & U. Walwei (Eds.), Determinants of employment: the macroeconomic view (pp. 101–117). Nomos: Baden-Baden.

    Google Scholar 

  • Hoynes, H. W. (1996). Welfare transfers in two-parent families: labor supply and welfare participation under AFDC-UP. Econometrica, 64(29), 295–332.

    Article  Google Scholar 

  • Immervoll, H. (2007). Minimum wages, minimum labour costs and the tax treatment of low-wage employment, OECD Social, Employment and Migration Working Paper 46.

  • Immervoll, H., Kleven, H. J., Kreiner, C. T., & Saez, E. (2007). Welfare reform in European countries: a microsimulation analysis. The Economic Journal, 117(516), 1–44.

    Article  Google Scholar 

  • Isaksson, A.-S., & Lindskog, A. (2009). Preferences for redistribution: a country comparison of fairness judgements. Journal of Economic Behavior & Organization, 72(3), 884–902.

    Article  Google Scholar 

  • Kanbur, R., & Tuomala, M. (2011). Charitable conservatism, poverty radicalism and inequality aversion. The Journal of Economic Inequality, 9(3), 417–431.

    Article  Google Scholar 

  • Kanbur, R., Pirttilä, J., & Tuomala, M. (2006). Non-welfarist optimal taxation and behavioural public economics. Journal of Economic Surveys, 20(5), 849–868.

    Article  Google Scholar 

  • Keane, M., & Rogerson, R. (2012). Reconciling micro and macro labor supply elasticities: a structural perspective. Journal of Economic Literature, 50(2), 464–476.

    Article  Google Scholar 

  • Lambert, P. J., Millimet, D. L., & Slottje, D. (2003). Inequality aversion and the natural rate of subjective inequality. Journal of Public Economics, 87(5), 1061–1090(30).

    Article  Google Scholar 

  • Madden, D. (1996). An analysis of indirect tax reform in Ireland in the 1980s. Fiscal Studies, 16, 18–37.

    Article  Google Scholar 

  • Piketty, T. (1995). Social mobility and redistributive politics. The Quarterly Journal of Economics, 110(3), 551–584.

    Article  Google Scholar 

  • Piketty, T., & Saez, E. (2013). Optimal labor income taxation. In Handbook of public economics (Vol. 5). Amsterdam: North Holland, forthcoming.

    Google Scholar 

  • Rawls, J. (1972). A theory of justice. Oxford: Oxford University Press.

    Google Scholar 

  • Ross, T. W. (1984). Uncovering regulator’s social welfare weights. The Rand Journal of Economics, 15, 152–155.

    Article  Google Scholar 

  • Saez, E. (2002). Optimal income transfer programs: intensive versus extensive labor supply responses. The Quarterly Journal of Economics, 117(3), 1039–1073.

    Article  Google Scholar 

  • Saez, E., & Stantcheva, S. (2012). Endogenous social welfare weights for optimal tax theory. Mimeo.

  • Singhal, M. (2008). Quantifying preferences for redistribution. Paper presented at the AEA Annual Meeting January 2009.

  • Spadaro, A. (2008). Optimal taxation, social contract and the four worlds of welfare capitalism. PSE Working Paper No. 38-2008.

  • Stern, N. (1977). Welfare weights and the elasticity of the marginal valuation of income. In M. Artis & R. Nobay (Eds.), Studies in modern economic analysis, Oxford: Basil Blackwell.

    Google Scholar 

  • Sutherland, H. (2001). Final report EUROMOD: an integrated European benefit-tax model. EUROMOD Working Paper No. EM9/01, ISER.

  • van Soest, A. (1995). Structural models of family labor supply: a discrete choice approach. The Journal of Human Resources, 30(1), 63–88.

    Article  Google Scholar 

Download references

Acknowledgements

We thank Dhammika Dharmapala (the editor) and three anonymous referees as well as discussants & participants at ZEW (Mannheim), the NTA conference 2010 (Chicago) and several seminars (IZA, FU Berlin, UCD) for helpful comments and suggestions. We are indebted to all past and current members of the EUROMOD consortium for the construction and development of EUROMOD, and to the NBER for access to TAXSIM. The ECHP and EU-SILC were made available by Eurostat; the Austrian version of the ECHP by Statistik Austria; the PSBH by the University of Liège and the University of Antwerp; the Estonian HBS by Statistics Estonia; the IDS by Statistics Finland; the EBF by INSEE; the GSOEP by DIW Berlin; the Greek HBS by the National Statistical Service of Greece; the Living in Ireland Survey by the ESRI; the SHIW by the Bank of Italy; the SEP by Statistics Netherlands; the Polish HBS by the University of Warsaw; the IDS by Statistics Sweden; and the FES by the UK ONS through the Data Archive.

Author information

Authors and Affiliations

  1. Aix-Marseille School of Economics, EHESS & CNRS, Aix-Marseille, France

    Olivier Bargain

  2. IZA, Schaumburg-Lippe Str. 5-7, 53113, Bonn, Germany

    Olivier Bargain, Mathias Dolls, Dirk Neumann, Andreas Peichl & Sebastian Siegloch

  3. CEPS-INSTEAD, Esch-sur-Alzette, Luxembourg

    Olivier Bargain

  4. University of Cologne, Cologne, Germany

    Mathias Dolls, Dirk Neumann, Andreas Peichl & Sebastian Siegloch

  5. CESifo, Munich, Germany

    Andreas Peichl

Authors
  1. Olivier Bargain
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mathias Dolls
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Dirk Neumann
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Andreas Peichl
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Sebastian Siegloch
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Andreas Peichl.

Additional information

Material from the FES is Crown Copyright and is used by permission. None of the institutions cited above bear any responsibility for the analysis or interpretation of the data reported here. The usual disclaimer applies.

Electronic Supplementary Material

Appendices

Appendix I: Descriptive statistics

Since the selected population is relatively homogeneous, Tables 2 and 3 essentially focus on the characteristics of the discretized income groups, i.e., the main ingredients of the optimal tax model. This includes income group shares h i , average levels of gross income Y i and disposable income C i for each group i=0,…,5. We also report effective “marginal” tax rates \(T_{i}^{\prime}=\frac{T_{i}-T_{i-1}}{Y_{i}-Y_{i-1}}\) and effective participation tax rates \(\frac{T_{i}-T_{0}}{Y_{i}-Y_{0}}\).

Table 2 Description of the discretized population of childless singles
Full size table
Table 3 Description of the discretized population of childless singles (cont.)
Full size table

Appendix II: Standard and Saez elasticities

Once the labor supply model is estimated, we numerically simulate elasticities at the individual level by predicting the labor supply effect of a change in income. For a comparison with the literature, we first calculate “standard” wage (resp. non-labor income) elasticities for each worker, defined as the increase in working time or participation rate when wage rates increase by 1 %. Standard errors are obtained by repeated random draws of the preference parameters from their estimated distributions and, for each draw, by recalculating elasticities.

In fact, despite the large increase in the number of childless single individuals over the last few decades, their labor supply behavior has received little attention. Part of it is due to the fact that recent evidence on labor supply responsiveness stems from natural experiments based on changes in tax and welfare policies, mainly in the US and the UK, and that these policies are usually confined to families with children (e.g., Eissa and Liebman 1996). Mean wage elasticities together with bootstrapped standard errors are reported in the upper panels of Tables 4–5. They are in line with limited available evidence as surveyed in Bargain et al. (2012). Elasticities are especially large in Spain, Ireland and Italy, as supported by Callan et al. (2009) and Aaberge et al. (2002). Other countries show intermediary values, which correspond to small elasticities around 0.1–0.2, for instance in Germany (see Haan and Steiner 2006). Hour elasticities, which incorporate both change in hours for those in work and participation effects, are close to participation elasticity. This supports that most of the total hour adjustment occurs at the extensive margin. Income elasticities are found to be very small in all countries, often not significantly different from zero and systematically smaller than 0.1 in absolute value. Ignoring income effects in the theoretical model and for the selected population is therefore a reasonable approximation.

For the particular elasticities used in Saez’ optimal tax model, we calibrate uniform changes in disposable income at the individual levels to obtain percent changes in income gaps as defined in Eqs. (2) and (3) in the paper. Total responses, measured as a change in the population shares in each income group, are then obtained by aggregation to calculate the extensive and intensive margins, i.e., η i and ζ i , for income groups i=1,…,I (see also Blundell et al. 2009). These elasticities are reported in the lower part of Tables 4–5 and discussed in the main part of the paper.

Table 4 Labor supply elasticities
Full size table
Table 5 Labor supply elasticities (cont.)
Full size table

Rights and permissions

Reprints and permissions

About this article

Cite this article

Bargain, O., Dolls, M., Neumann, D. et al. Comparing inequality aversion across countries when labor supply responses differ. Int Tax Public Finance 21, 845–873 (2014). https://doi.org/10.1007/s10797-013-9277-9

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10797-013-9277-9

Keywords

JEL Classification

Search

Navigation