Working Paper: NBER ID: w1864
Authors: Laurence Kotlikoff; Lawrence H. Summers
Abstract: This paper surveys major issues in the theory of tax incidence. These include the incidence of taxes in dynamic as well as static economies and open as well as closed economies. The survey does not represent a comprehensive review of the literature, rather it is offered to the reader as a pedoqogical piece that may be of use in teaching the theory of tax incidence.
Keywords: tax incidence; public economics; economic welfare
JEL Codes: H21; H22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| introduction of taxes (H29) | alters equilibrium prices (D41) |
| introduction of taxes (H29) | alters rewards to factors of production (D33) |
| tax on labor hiring (H31) | lower wages for laborers (J31) |
| tax on labor hiring (H31) | higher prices for consumers (D49) |
| tax burden distribution depends on elasticities of demand and supply (H31) | determines who ultimately bears the tax (H22) |
| taxes tend to be borne by inelastic suppliers or demanders (H22) | heavier tax burden (H22) |
| tax incidence must be assessed in conjunction with the use of tax revenue (H22) | introduces differential incidence (H22) |
| tax incidence must be assessed in conjunction with the use of tax revenue (H22) | introduces balanced budget incidence (H22) |