Chapter 16-Personal Taxation and behavior Public economics
1 Chapter 16 – Personal Taxation and Behavior Public Economics
Introduction a key policy question is how do households respond to the incentives presented in the u.s tax code? · We will examine: Labor supply Savng Housing Portfolio composition
2 Introduction • A key policy question is how do households respond to the incentives presented in the U.S. tax code? • We will examine: – Labor supply – Saving – Housing – Portfolio Composition
Labor Supply Theoretical considerations Recall from previous discussions of the welfare system, that a labor supply problem has the following elements Time Endowment Budget constraint, with a price of leisure of Sw references
3 Labor Supply: Theoretical Considerations • Recall from previous discussions of the welfare system, that a labor supply problem has the following elements: – Time Endowment (T) – Budget constraint, with a price of leisure of $w – Preferences
Labor Supply Theoretical considerations Figure 16 1 shows a typical labor supply framework Person chooses ft of work in this example, and attains utility on indifference curve ii
4 Labor Supply: Theoretical Considerations • Figure 16.1 shows a typical labor supply framework. • Person chooses FT of work in this example, and attains utility on indifference curve ii
Figure 16.1 ⅱi Income Leisure Work Hours of leisure per week Time endowment
Figure 16.1