Read the part of the post not quoted here. This is interesting but I think that a major problem to this is that cabbies are like salesmen in a way their actions translate to easily measurable stuff, other professions on the other hand are not as easy to measure. Take for instance bankers. How do you isolate how hard they work versus the money they get. The structure of compensation really is counter to what we want to measure. This is I believe the most important factor : Most of what people do cannot be tracked to what they earn. I believe how easy it is to see our actions translated to income\u00a0 the easier the more similar people become to the actions of the New York cabbies.<\/p>\n
Taxis and Taxes
\nWhat\u2019s the difference between high earners and New York cabbies? This question is central to the issue of whether the new 50% tax rate will actually raise revenue.
\nI ask it because of this new paper (early version here) by Orley Ashenfelter and colleagues.
\nThey studied how New York cab drivers changed their labour supply in response to the higher incomes caused by fare rises. And they found a negative elasticity, of around minus 0.2. That means a 10% rise in cabbies\u2019 revenue per mile caused them to work 2% less.
\nThis means we have a backward-bending labour supply curve, because the income effect outweighs the substitution effect.
\nNow, if what\u2019s true of cabbies is also true of bankers, this implies that higher taxes on the rich might indeed raise revenue. This is because the immediate effect of such taxes is to reduce peoples\u2019 incomes, so if the income effect is powerful – as it is for New York cabbies – they will work harder to recoup the money.
\nHence my question: in what ways do high earners differ from cabbies?
\nvia Stumbling and Mumbling: Taxis and Taxes<\/a>.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"Read the part of the post not quoted here. This is interesting but I think that a major problem to this is that cabbies are like salesmen in a way their actions translate to easily measurable stuff, other professions on the other hand are not as easy to measure. Take for instance bankers. How do … <\/p>\n