The estimates of labor supply generated in the model allow a rough estimation of the effect of tax reform on the number of jobs in the economy. However, the percentage change in labor supply from the initial steady-state cannot be translated into increases in employment opportunities because not all of the growth in labor supply will be related to new worker participation (the extensive margin). Some of the growth in labor supply will result from individual decisions to increase hours of work (the intensive margin).

Fortunately Blundell, Bozio and Laroque (2011) recently developed a statistical decomposition that provides bounds on the changes at the extensive and intensive margins for the United States, as wel as the United Kingdom and France. They used detailed microdata from 1977-2007 to estimate the importance of the intensive (number of hours worked) and extensive (whether to work at all) margins for explaining changers in total hours worked. In the United States, they found the range for the relative importance of the intensive margin was from 9.1 percent to 10.3 percent. They found that the range for the reltive importance of the extensive margin was from 89.7 percent to 90.9 percent.

Using the estimate fro the relative importance of the extensive margin, 89.7 percent, it is possible to determine roughly the effect of the tax reform on the number of jobs in the economy. The simulation predicts that labor supply wold increase by 5.6 percent 10 years after the reform, which is lower than the model estimates immediately after the reform due to the leveling out of capital stock growth. Applying the conservative estimate, 89.7 percent, from Blundell, Bozio, and Laroque implies that the number of jobs would be 5 percent larger than the initial baseline. To quantify this effect in terms of the current U.S. population and job market, this increase is applied directly to the state-level, cyclically adjusted, non-farm employment figures from the June 2012 Bureau of Labor Statistics preliminary report. This calibration also abstracts away from unrelated changes in the employment to population ratio.

Doing so suggests that, across the 50 U.S. states and Washington D.C., enacting such a tax reform would increase the number of non-farm jobs in the U.S. economy after 10 years by the equivalent of 6.8 million jobs today.