Public Economics Lectures Part 1: Introduction

Chetty et al. 2009: Testable Predictions
Model generates three predictions:
1 [Size] Larger tax changes generate larger observed elasticities
Large tax changes are more likely to induce workers to search for a
different job
2 [Scope] Tax changes that apply to a larger group of workers generate
larger observed elasticities
Firms tailor jobs to preferences of common workers
3 [Search Costs] Workers with lower search costs exhibit larger
elasticities from individual bunching
Public Economics Lectures ()Part 5: Income Taxation and Labor Supply 48 / 217