Tax Liability Side Equivalence in Gift-Exchange Labor Markets

Jean-Robert Tyran and Arno Riedl

University of St. Gallen Department of Economics working paper series 2003 from Department of Economics, University of St. Gallen

Abstract: Tax Liability Side Equivalence (tax LSE) claims that the statutory incidence of a tax is irrelevant for its economic incidence. In gift-exchange labor markets, firms provide a gift to workers by paying high wages, and workers reciprocate by providing high efforts. Tax LSE is theoretically predicted to hold in gift-exchange markets if workers’ effort choices exclusively depend on the net wage, but breaks down if they partially depend on the gross wage paid to workers. We experimentally test tax LSE in a giftexchange market and find that it holds surprisingly well.

Keywords: Tax incidence; Efficiency wages; Gift exchange; Experiments (search for similar items in EconPapers)
JEL-codes: C92 H22 J41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2003-08
New Economics Papers: this item is included in nep-exp and nep-pbe
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Tax liability side equivalence in gift-exchange labor markets (2005)
Working Paper: Tax Liability Side Equivalence in Gift-Exchange Labor Markets (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2003:2003-15

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