The Effects of Progressive Income Taxation on Job Turnover / William M. Gentry, R. Glenn Hubbard.

By:

Gentry, William M

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9226.Publication details: Cambridge, Mass. National Bureau of Economic Research 2002.Description: 1 online resource: illustrations (black and white)Subject(s):

H3 - Fiscal Policies and Behavior of Economic Agents

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Abstract: We examine whether the level of the income tax rate and the convexity of the income tax schedule affect job mobility, as measured by moving to a better job. While the predicted effect of the level of the tax rate is ambiguous, we predict that an increase in the convexity of the tax schedule decreases job search activity by taxing away some of the benefits of a successful job search. Using data from the Panel Study of Income Dynamics, we estimate that both higher tax rates and increased tax rate progressivity decrease the probability that a head of household will move to a better job during the coming year. Our estimates imply that a five-percentage-point reduction in the marginal tax rate increases the average probability of moving to a better job by 0.79 percentage points (a 8.0 percent increase in the turnover propensity) and that a onestandard- deviation in our measure of tax progressivity would increase this probability by 0.86 percentage points (a 8.7 percent increase in the turnover propensity).

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w9226 (Browse shelf(Opens below))	Not For Loan

Total holds: 0

September 2002.

We examine whether the level of the income tax rate and the convexity of the income tax schedule affect job mobility, as measured by moving to a better job. While the predicted effect of the level of the tax rate is ambiguous, we predict that an increase in the convexity of the tax schedule decreases job search activity by taxing away some of the benefits of a successful job search. Using data from the Panel Study of Income Dynamics, we estimate that both higher tax rates and increased tax rate progressivity decrease the probability that a head of household will move to a better job during the coming year. Our estimates imply that a five-percentage-point reduction in the marginal tax rate increases the average probability of moving to a better job by 0.79 percentage points (a 8.0 percent increase in the turnover propensity) and that a onestandard- deviation in our measure of tax progressivity would increase this probability by 0.86 percentage points (a 8.7 percent increase in the turnover propensity).