The market wage elasticity of labor is zero.If this is the case, the excess burden of a tax on labor income will also be zero.

Question

Quizplus · Accepted Answer

If the market wage elasticity of labor is zero, it means that an increase in the wage rate will not result in a decrease in the demand for labor. However, this does not mean that there is no excess burden of a tax on labor income. A tax on labor income will increase the cost of hiring workers for firms and reduce the after-tax income of workers, which can still result in a distortion of labor market outcomes and a loss of economic welfare.

The Market Wage Elasticity of Labor Is Zero