Abstract
Whether labour bears full burden of household level income and consumption taxes ultimately depends on the degree of substitutability among different types of labour in production. We find more variation in incidence patterns across households with less than perfectly substitutable heterogeneous labour than with perfectly substitutable homogeneous labour in production. This finding is based on results obtained from homogeneous and heterogeneous labour general equilibrium tax models calibrated to decile level income and consumption distribution data of UK households for the year 1994. We use labour supply elasticities implied by the substitution elasticity in households’ utility functions and derive labour demand elasticities from the substitution elasticity in the production function.
Article Footnote
Bhattarai and Whalley acknowledge financial support from the ESRC under an award for a project on General Equilibrium Modelling of UK Policy Issues. We are thankful to Baldev Raj and two referees for comments on earlier versions of this paper.
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© 2000 Springer-Verlag Berlin Heidelberg
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Bhattarai, K., Whalley, J. (2000). The role of labour demand elasticities in tax incidence analysis with heterogeneous labour. In: Boadway, R., Raj, B. (eds) Advances in Public Economics. Studies in Empirical Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-642-57654-6_3
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DOI: https://doi.org/10.1007/978-3-642-57654-6_3
Publisher Name: Physica, Heidelberg
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