Taxes, benefits, and careers: Complete versus incomplete markets

Lars Ljungqvist, Thomas Sargent

    Research output: Contribution to journalArticle

    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 languageEnglish (US)
    Pages (from-to)98-125
    Number of pages28
    JournalJournal of Monetary Economics
    Volume55
    Issue number1
    DOIs
    StatePublished - Jan 2008

    Fingerprint

    Incomplete markets
    Tax
    Government
    Labor tax
    Insurance market
    Market model
    Complete markets
    Lottery
    Microeconomics
    Macroeconomics
    Market structure
    Tax rate
    Life-cycle model
    Human capital
    Human capital accumulation
    Indivisible labor
    Leisure

    Keywords

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

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    Taxes, benefits, and careers : Complete versus incomplete markets. / Ljungqvist, Lars; Sargent, Thomas.

    In: Journal of Monetary Economics, Vol. 55, No. 1, 01.2008, p. 98-125.

    Research output: Contribution to journalArticle

    Ljungqvist, Lars ; Sargent, Thomas. / Taxes, benefits, and careers : Complete versus incomplete markets. In: Journal of Monetary Economics. 2008 ; Vol. 55, No. 1. pp. 98-125.
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