Mostly summarized from Gregory Mankiw’s Principles of Economics 5th Ed.
PART
2 How Markets Work
Chapter 6 of
36 Supply, Demand, and Government Policies
Section 14 of
15
…
Figure 9 illustrates the general lesson
a tax burden falls more heavily on
whichever side of the market for a good, consumers or suppliers, that is less
elastic, less sensitive to price increase caused by the tax.
Elasticity measures the willingness of consumers
or suppliers to exit a market when conditions change unfavorably, such as a tax
increase.
…
Case of a small elasticity of demand,
Figure 9 (a).
A relatively inelastic, more vertical,
demand curve means consumers have few alternatives to consuming the good, there
is not a close substitute to purchase.
Case of a small elasticity of supply,
Figure 9 (b).
A relatively inelastic, more vertical,
supply curve means suppliers have few alternatives to supplying the good,
cannot easily produce something else.
…
When a good is taxed
· the side of the market, consumers or
suppliers
· with fewer alternatives = more
inelastic = more vertical curve
· is less willing to leave the market
than the other side
· and bears more of the burden of the
tax
…
In case (a), for the FICA payroll tax
· consumers (firms) have to pay a lot
more for the good (workers’ labor), up to B from A
· suppliers (workers) have to receive a
little less, down to C from A
In case (b)
· consumers have to pay a little more
for the good, up to D from A
· suppliers have to receive a lot less,
down to E from A
…
Most economists believe the supply of
labor is much less elastic than the demand for it, as in panel (b).
This means distribution of the FICA payroll
tax burden is not close to the half to firms and half to workers lawmakers
intend.
Rather most of the payroll tax burden
falls on workers.
As shown before, the end result would
be the same even if firms, or workers, paid 100% of the tax.
… …
most economists believe it
hotondo no keizai gakusha ga sore o
shinjite imasu
ほとんどの経済学者がそれを信じています
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