NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Taxation, Wage Variation, and Job Choice

James N. Brown, Harvey S. Rosen

NBER Working Paper No. 1284 (Also Reprint No. r1078)
Issued in December 1988
NBER Program(s):   PE

This paper examines the effect of earnings taxes on the variability of wages over time. We estimate a "hedonic wage locus" which indicates how the market allows individuals to substitute the mean level of the wage for its variability across jobs. Information from this locus is used to estimate the parameters of individuals' indifference curves between the mean and temporal variation of hourly wages. On the basis of these utility function parameters, we predict that lowering the rate of taxation on earnings would on average lead workers to choose jobs with a higher pre-tax mean wage and with greater wage variation.

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Document Object Identifier (DOI): 10.3386/w1284

Published: Brown and Rosen, Journal of Labor Economics, October 1987. citation courtesy of

 
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