We examine how tax avoidance in the form of trade in well-functioning asset markets affects the basic labor supply model. We show that tax arbitrage has dramatic implications for positive, normative and econometric analysis of how taxes affect work incentives.

The two perhaps most influential empirical labor supply studies carried out in the U.S. in recent years, Hausman (1981) and MaCurdy, Green & Paarsch (1990), report sharply contradicting labor supply estimates. In this paper we seek to uncover the driving forces behind the seemingly...

This paper estimates the macroeconomic effect of labor market programs on labor force participation. Labor market programs could counteract business-cycle variation in the participation rate that is due to the discouraged-worker effect, and they could prevent labor force outflow. An equation...