Income Taxation and Married Male Life-cycle Labor Supply in Taiwan

• Main Authors: CHIEN, MING-CHIH, 簡鳴志
• Other Authors: SU, JAIN-RONG
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/52864086660862368092

碩士 === 國立臺北大學 === 財政學系 === 93 === This paper uses Panel Study of Family Dynamics (PSFD) to estimate intertemporal substitution elasticity (ISE) after tax, and it is the major purpose to use panel data to analyze the taxation of married male labor supply in a life-cycle setting. According to Chang (1992) provides a useful framework to solve the endogenous variable problems due to piecewise progressive tax system, and it can be done just like to face in a linear budget constraint line under a proportional tax. Therefore this paper combines with the considerations of tax and using the panel data to estimate how and what tax affects the labor supply of married male in a life-cycle model. The econometric model of the paper is using Two Stage Least Square of Fixed Effects model, in the first step I regress the wage rate function before tax with men’s years and square years of experience and the average income in his working industry in fixed effects model. So we can get the fitted values of the wage rate before tax to compute the gross income of male, and then plus his wife’s income equals the gross income of the family. Therefore subtract the exemptions and the deductions from the gross income of the family we can get the net income of the family. Finally it makes the marginal tax rate could be calculated by the tax law. In the second step, we regress the hours of men’s labor supply with his age, square age, conditions of his health, family backgrounds and his wage rate after tax in fixed effects model. The empirical results of this paper reveal that the ISE after tax is larger than before tax. The ISE after tax is about from 1.10 to 2.45, and the ISE before tax is about from 0.45 to 1.61. The older men’s ISE is larger than younger men’s ISE before and after tax. In my opinion, the reason of these results is the progressive tax which makes the changes of wage rate after tax less than the changes before tax. When the denominator of the ISE becomes small and the numerator of the ISE is the same, the ratio of ISE would become large. Besides, the wage, labor supply and income profile of one’s whole life are like the descriptions of the life-cycle theory. The labor supply profile is the inverse U shape, and the wage profile is increasing continually until he was dead. The income profile is also an inverse U shape, and the highest peak of the income profile comes earlier than labor supply profile but latter than wage profile.