Ricardian equivalence with wage-rate uncertainty.: An article from: Journal of Money, Credit & Banking

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From the author: This paper examines Ricardian equivalence when the wage rate is uncertain and people choose their labor supply. We review the model of Barsky, Mankiw, and Zeldes (AER 1986) and show that their finding of a positive marginal propensity to consume out of a tax cut is due to the insurance aspect of distortionary taxation. Then we explore the trade-off between this insurance aspect and labor-supply distortions in the context of a model similar to that of Barsky, Mankiw, and Zeldes, but incorporating labor supply.

From the supplier: This paper examines Ricardian equivalence when the wage rate is uncertain and people choose their labor supply. We review the model of Barsky, Mankiw, and Zeldes (AER 1986) and show that their finding of a positive marginal propensity to consume out of a tax cut is due to the insurance aspect of distortionary taxation. Then we explore the trade-off between this insurance aspect and labor-supply distortions in the context of a model similar to that of Barsky, Mankiw, and Zeldes, but incorporating labor supply. (Reprinted by permission of the publishers.)

Citation Details
Title: Ricardian equivalence with wage-rate uncertainty.
Author: Dean Croushore
Publication:Journal of Money, Credit & Banking (Refereed)
Date: August 1, 1996
Publisher: Ohio State University Press
Volume: v28 Issue: n3 Page: p279(15)

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