ABSTRACT
This chapter outlines a number of complications which can arise because of the presence of non-linearities. It begins with the sample of 335 married male workers which J. Ashworth and D. T. Ulph used in obtaining labour supply estimates. The chapter explains why, for a variety of reasons, knowledge of the labour supply function is insufficient to enable one to predict the effects of various changes in the tax system. It provides the basic structure of the simulation model. The chapter aims to undertake a simulation exercise for a sample of weekly-paid married male workers in the UK. Starting from the initial equilibrium for a given change in the tax rate the level of allowances was permitted to vary in order to leave the level of tax revenue unchanged. The need variable is subtracted from unearned income to give a measure of consumption unrelated to need.
