Employment Structure and the Rise of the Modern Tax System
American Economic Review
vol. 112,
no. 1, January 2022
(pp. 213-34)
Abstract
This paper builds a new microdatabase that covers 100 countries at all income levels and long-run time series in the United States (1870–2010) and Mexico (1960–2010) to document how the modern tax system arises over development. I establish a new set of stylized facts, which show that the income tax exemption threshold decreases in the income distribution as a country develops, tracking growth in the employee share of employment that occurs gradually further down the income distribution. Additional evidence supports the interpretation that the rise in third-party covered income through increases in employee share drives expansions of the income tax base over development.Citation
Jensen, Anders. 2022. "Employment Structure and the Rise of the Modern Tax System." American Economic Review, 112 (1): 213-34. DOI: 10.1257/aer.20191528Additional Materials
JEL Classification
- D31 Personal Income, Wealth, and Their Distributions
- H23 Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H71 State and Local Taxation, Subsidies, and Revenue
- J22 Time Allocation and Labor Supply
- J23 Labor Demand
- N40 Economic History: Government, War, Law, International Relations, and Regulation: General, International, or Comparative