Three essays on the impacts of income taxes

This dissertation consists of three essays studying the impacts of income and wage taxes. Chapter One examines how income tax changes differentially affect the pre-tax wages of different industries based on the injury and fatality rates of those industries. This chapter recognizes that compensating differentials are a function of the income tax rate and uses this observation to introduce a new methodology for estimating compensating differentials with a specific application to the estimation of the Value of a Statistical Life (VSL) parameter. When taxes change, the pre-tax wages of risky jobs should shift relative to the pre-tax wages of safe jobs in a manner proportional to the VSL. This strategy yields VSL estimates between $50 million and $75 million, an order of magnitude higher than the previous literature. Chapter Two studies the link between taxes and occupational choices. Just as taxes distort the labor-leisure decision, they also distort the wage-amenity decision. Few papers have isolated this effect. This chapter introduces a two-step estimation strategy to isolate the elasticity of occupation choice with respect to tax rates, testing whether workers select higher (lower) wage jobs when tax rates decrease (increase). The final estimates find a statistically significant overall compensated elasticity of 0.05, implying that a 10% increase in the net-of-tax rate causes workers to change to a job with a 0.5% higher wage. Chapter Three focuses on the tax elasticity of labor income.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2009

Author dc:creator

• Powell, David Matthew, Ph. D. Massachusetts Institute of Technology

Advisor dc:contributor.advisor

• James M. Poterba and Jonathan Gruber.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/49713

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/49713