As part of the Brown Bag Lunch series, the International Economics Department at the Graduate Institute is pleased to invite you to a public talk given by Rahul Mukherjee, Assistant Professor of International Economics and affiliated to the Centre for Finance and Development (CFD), presenting

Taxes and Dual Labor Margins: A Macroeconomic Perspective, coauthored with Brendan Epstein (University of Massachusetts), Alan Finkelstein Shapiro (Tufts University) and Shanthi Ramnath (Chicago Fed).

Abstract: We study the relationship between trends in taxes and trends in the two margins of labor - hours worked per worker and the employment-population ratio - from a macroeconomic perspective, focusing on Europe and the US. In contrast to most of the earlier literature that focuses only on the product of the two margins (hours worked per population), we develop a tractable and intuitive extension of a standard tax-inclusive macroeconomic model that allows for disentangling the two margins of labor in a purely Walrasian framework. For both Europe and the US the model separately tracks the behavior of each margin exceedingly well, and therefore also the behavior of hours worked per population. Our paper thus contributes to resolving a puzzling result in related literature, which is that standard tax-inclusive macroeconomics models that do not distinguish between the two labor margins can help explain the trend behavior of hours worked per population in Europe, but yield starkly counterfactual predictions for U.S. hours worked per population. Our model also highlights the role of capital taxes in this context, which is novel. More broadly, our findings are relevant for assessing the long run impact on labor markets of factors such as tax and labor market reforms, productivity, and demographics.

The Brown Bag Lunch is a weekly event organized by International Economics where professors and doctoral students are invited to present their ongoing research. For more details please send an e-mail to Rémi Viné or Maria Kamran. All events take place on a Monday, from 12:15 - 13:45 at Maison de la Paix