2,804 research outputs found
The Frisch elasticity in the Mercosur countries: A pseudo-panel approach
Copyright @ 2011 Brunel UniversityThis paper provides estimates for the Mercosur countries of the Frisch elasticity —i.e., the elasticity of substitution between
worked hours and real wages holding constant the marginal utility of wealth—. We find a strong heterogeneity, with estimated elasticities ranging from 12.8 in Argentina to -13.1 in Paraguay. Brazil and Uruguay are in between, both with negative values of -1.9 and -1.4, respectively. We argue that the
existence of severe liquidity constraints is the main reason behind the negative estimates found in Brazil, Paraguay and
Uruguay. The heterogeneity of these estimates is the outcome of differences in many relevant economic dimensions —ranging
from sectorial specialization to welfare state provisions and labor market specificities— all of them crucially affecting the socioeconomic situation of individuals. The diversity of Frisch
elasticities calls for the development of a cross-country (rather than a within-country) policy approach, since they crucially
affect the dynamics of the business cycle and business cycle synchronization is a step prior to the design of macroconvergence
policies in the Mercosur context
Taxation, aggregates and the household
We evaluate reforms to the U.S. tax system in a dynamic setup with heterogeneous married and single households, and with an operative extensive margin in labor supply. We restrict our model with observations on gender and skill premia, labor force participation of married females across skill groups, and the structure of marital sorting. We study four revenue-neutral tax reforms: a proportional consumption tax, a proportional income tax, a progressive consumption tax, and a reform in which married individuals file taxes separately. Our findings indicate that tax reforms are accompanied by large and differential effects on labor supply: while hours per-worker display small increases, total hours and female labor force participation increase substantially. Married females account for more than 50% of the changes in hours associated to reforms, and their importance increases sharply for values of the intertemporal labor supply elasticity on the low side of empirical estimates. Tax reforms in a standard version of the model result in output gains that are up to 15% lower than in our benchmark economy
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