This paper formulates an empirical model of consumption and labor supply that explicitly incorporates income taxes in a multiperiod setting. This model relies on few assumptions and provides a robust framework for estimating parameters needed to predict the response of consumption and hours of...

We build a life cycle model of labor supply that incorporates changes along both the intensive and extensive margin and use it to assess the consequences of changes in tax and transfer policies on equilibrium hours of work. We find that changes in taxes have large aggregate effects on hours of...