Empirical studies of labor supply behavior in the United States suggest that the elasticity of labor supply is ________ and therefore most of the payroll tax in the United States is borne by workers.

Question

Quizplus · Accepted Answer

Empirical studies suggest that the elasticity of labor supply is close to zero, indicating that workers' response to changes in wages (due to taxes or otherwise) by changing the amount they work is minimal. Therefore, most of the payroll tax burden falls on the workers themselves, as they are unlikely to significantly alter their labor supply in response to the tax.

Empirical Studies of Labor Supply Behavior in the United States