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Tax Incidence in a Principal-Agent Framework∗
Francisco Rivadeneyra
June 17, 2005
Abstract
Using a Principal-Agent framework, this paper studies the implications
to economic incidence and behavioral changes of introducing a payroll
tax. Two kinds of comparative statics are performed, maintaining the
contract binding after the tax change and another that allows the contract
to change. The purpose is to derive a testable implication to measure the
incidence in this environment.
1 Introduction
Tax incidence studies the economic burden of a tax. The literature has had,
to some extent, an empirical approach. Most studies focus on accounting for
the effects of taxes over different cohorts of the population, between different
groups in the marketplace or effects over time to capital accumulation and the
like. For a review of the literature see Fullerton and Metcalf (2002).
The literature starts from the insight that, when lump sum taxes are not......

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Approximate Word Count: 4597
Approximate Pages: 19 (250 words per double-spaced page)

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