Working Paper

Nonparametric estimation of the impact of taxes on female labor supply

Abstract: Econometric models with nonlinear budgets sets frequently arise in the study of impact of taxation on labor supply. Blomquist and Newey (2002) have suggested a nonparametric method to estimate the uncompensated wage and income effects when the budget set is nonlinear. This paper extends their nonparametric estimation method to censored dependent variables. The modified method is applied to estimate female wage and income elasticities using the 1987 PSID. I find evidence of bias if the nonlinearity in the budget set is ignored. The median compensated elasticity is estimated at 1.19 (with a standard error of 0.19).

Keywords: Labor supply; Women - Employment; Wages;

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Bibliographic Information

Provider: Federal Reserve Bank of Dallas

Part of Series: Working Papers

Publication Date: 2005

Number: 0505

Pages: 61 pages

Note: Published as: Kumar, Anil (2012), "Nonparametric Estimation of the Impact of Taxes on Female Labor Supply," Journal of Applied Econometrics 27 (3): 415-439.