Income Taxes, Gross Hourly Wages, and the Anatomy of Behavioral Responses: Evidence from a Danish Tax Reform

Kazuhiko Sumiya and Jesper Bagger

Papers from arXiv.org

Abstract: This paper provides quasi-experimental evidence on how income taxes affect gross hourly wages, utilizing Danish administrative data and a tax reform that introduced joint taxation. Exploiting spousal income for identification, we present nonparametric, difference-in-differences graphical evidence among husbands. For low-income workers, taxes have negative and dynamic effects on wages; their wage elasticity with respect to net-of-marginal-tax rates is 0.4. For medium-income workers, the effects are smaller and insignificant. Wages respond to taxes through promotions or job-to-job transitions. Neither daily nor annual hours worked respond significantly; consequently, annual earnings respond to taxes primarily through hourly wages, rather than through labor supply.

Date: 2025-10
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2510.16483 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2510.16483

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().