【正文】
hapter 13 29 An Increase in Government Purchases Financed by a Labor Ine Tax ? Now bine ? the permanent increase in G ? and the higher marginal ine tax rateτw ? The ine effect increases the supply of labor. Macroeconomics Chapter 13 30 An Increase in Government Purchases Financed by a Labor Ine Tax ? We found in this chapter that the substitution effect from a higher marginal tax rate, τw, on labor ine reduces the quantity of labor supplied. ? The effect on the supply of labor is not so large. Macroeconomics Chapter 13 31 An Increase in Government Purchases Financed by a Labor Ine Tax ? Empirically, the overall effect from permanently increased government purchases, G, on the quantity of labor supplied, Ls , seems to be small. Macroeconomics Chapter 13 32 An Increase in Government Purchases Financed by a Labor Ine Tax Macroeconomics Chapter 13 33 Transfer Payments ? Suppose that the government increases real transfers, V, and finances these expenditures with increased real taxes, T, collected by a tax on labor ine. ? In this case, marginal ine tax rates, τw, rise for two reasons. ? First, the rise in T goes along with a higher τw for households that pay individual ine taxes. ? Second, for households that are receiving transfers— such as poor welfare recipients— the expansion of the transfer program raises the implicit marginal ine tax rate, τw, because of the ine testing for benefits. ? We therefore predict even stronger effects In particular, labor input, L, capital services, κK, and real GDP, Y, tend to decline.