Filling in the blanks. How does information about the Swedish EITC affect labour supply?

Pär Nyman (), Linuz Aggeborn and Rafael Ahlskog
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Pär Nyman: Statsvetenskapliga institutionen, Uppsala universitet., Postal: Statsvetenskapliga institutionen, Uppsala universitet. , Sweden
Linuz Aggeborn: Statsvetenskapliga institutionen, Uppsala universitet, Postal: Statsvetenskapliga institutionen, Uppsala universitet. , Sweden
Rafael Ahlskog: Statsvetenskapliga institutionen, Uppsala universitet, Postal: Statsvetenskapliga institutionen, Uppsala universitet, Sweden

No 2022:9, Working Paper Series from IFAU - Institute for Evaluation of Labour Market and Education Policy

Abstract: Information plays a key role in economics. According to the benchmark neoclassical model, agents require information in order to optimize their choices. Information, however, is sometimes incomplete or asymmetric in the real world. In this paper, we investigate the role of information for the labour–leisure choice. We conduct an information experiment wherein we distribute a leaflet about the Swedish Earned Income Tax Credit (EITC), and then study the effects with registry data. More specifically, we focus on the household decision to allocate between labour income and parental leave payments. The EITC, it bears noting, applies to the former but not to the latter. The construction of the Swedish EITC generates a strong economic incentive to have some labour income during a calendar year, because it is tailored to benefit low labour income earners more in relative terms. Yet, despite the substantial economic incentives involved, and despite the flexibility with which a person may earn labour income, we find that providing information about the features of the EITC has zero impact on labour supply.

Keywords: Labour Supply; Information; Experiment; Earned Income Tax Credit; Sweden (search for similar items in EconPapers)
JEL-codes: I21 I26 J18 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2022-05-12
New Economics Papers: this item is included in nep-eur and nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:ifauwp:2022_009

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