Taxes, benefits, and careers: Complete versus incomplete markets

Lars Ljungqvist; Thomas J. Sargent

doi:10.1016/j.jmoneco.2007.10.003

Taxes, benefits, and careers: Complete versus incomplete markets

Lars Ljungqvist, Thomas J. Sargent

Research output: Contribution to journal › Article › peer-review

Abstract

An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in a comparable collectivist representative-family model with employment lotteries and complete-insurance markets. The incomplete- and complete-market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes.

Original language	English (US)
Pages (from-to)	98-125
Number of pages	28
Journal	Journal of Monetary Economics
Volume	55
Issue number	1
DOIs	https://doi.org/10.1016/j.jmoneco.2007.10.003
State	Published - Jan 2008

Keywords

Benefits
Career
Complete markets
Employment lotteries
Human capital
Incomplete markets
Indivisible labor
Labor supply elasticity
Retirement
Taxes

ASJC Scopus subject areas

Finance
Economics and Econometrics

Access to Document

10.1016/j.jmoneco.2007.10.003

Cite this

@article{68bc143a92834343b3eb462b5b875e94,

title = "Taxes, benefits, and careers: Complete versus incomplete markets",

abstract = "An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in a comparable collectivist representative-family model with employment lotteries and complete-insurance markets. The incomplete- and complete-market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes.",

keywords = "Benefits, Career, Complete markets, Employment lotteries, Human capital, Incomplete markets, Indivisible labor, Labor supply elasticity, Retirement, Taxes",

author = "Lars Ljungqvist and Sargent, {Thomas J.}",

year = "2008",

month = jan,

doi = "10.1016/j.jmoneco.2007.10.003",

language = "English (US)",

volume = "55",

pages = "98--125",

journal = "Journal of Monetary Economics",

issn = "0304-3932",

publisher = "Elsevier",

number = "1",

}

TY - JOUR

T1 - Taxes, benefits, and careers

T2 - Complete versus incomplete markets

AU - Ljungqvist, Lars

AU - Sargent, Thomas J.

PY - 2008/1

Y1 - 2008/1

N2 - An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in a comparable collectivist representative-family model with employment lotteries and complete-insurance markets. The incomplete- and complete-market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes.

AB - An incomplete-market life-cycle model with indivisible labor makes career lengths and human capital accumulation respond to labor tax rates and government supplied non-employment benefits. We compare aggregate and individual outcomes in this individualistic incomplete-market model with those in a comparable collectivist representative-family model with employment lotteries and complete-insurance markets. The incomplete- and complete-market structures assign leisure to different types of individuals who are distinguished by their human capital and age. These microeconomic differences distinguish the two models in terms of how macroeconomic aggregates respond to some types of government supplied non-employment benefits, but remarkably, not to labor tax changes.

KW - Benefits

KW - Career

KW - Complete markets

KW - Employment lotteries

KW - Human capital

KW - Incomplete markets

KW - Indivisible labor

KW - Labor supply elasticity

KW - Retirement

KW - Taxes

UR - http://www.scopus.com/inward/record.url?scp=39449105079&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=39449105079&partnerID=8YFLogxK

U2 - 10.1016/j.jmoneco.2007.10.003

DO - 10.1016/j.jmoneco.2007.10.003

M3 - Article

AN - SCOPUS:39449105079

SN - 0304-3932

VL - 55

SP - 98

EP - 125

JO - Journal of Monetary Economics

JF - Journal of Monetary Economics

IS - 1

ER -

Taxes, benefits, and careers: Complete versus incomplete markets

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this