When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by
.

Question

When taxes are included in the stylized DSGE model, with Cobb-Douglas production, labor demand is given by  
.

Quizplus · Accepted Answer

In the stylized DSGE model with Cobb-Douglas production, including taxes does not change the functional form of the labor demand equation, which remains as: L = A(K^α)(E^(1-α)), where L is labor demand, A is total factor productivity, K is capital, E is total hours worked, and α is the share of capital in production.

When Taxes Are Included in the Stylized DSGE Model, with Cobb-Douglas