Hourly Wage Rate and Taxable Labor Income Responsiveness to Changes in Marginal Tax Rates
Sören Blomquist and
Håkan Selin
No 2009:1, Working Paper Series, Center for Fiscal Studies from Uppsala University, Department of Economics
Abstract:
Recently, a voluminous literature estimating the taxable income elasticity has emerged as an important field in empirical public economics. However, to a large extent it is still unknown how the hourly wage rate, an important component of taxable income, reacts to changes in marginal tax rates. In this study we use a rich panel data set and a sequence of tax reforms that took place in Sweden during the 1980’s to estimate the elasticity of the hourly wage rate with respect to the net-of-tax rate. While carefully accounting for the endogeneity of marginal tax rates as well as other factors that determine wage rates we do find a statistically significant response both among married men and married women. The hourly wage rate elasticity with respect to the net-of-tax rate is estimated to 0.14-0.16 for males and 0.41-0.57 for females. In addition, we obtain uncompensated taxable labor income elasticities of around 0.21 for men and 0.96-1.44 for women. In contrast to earlier studies, we also find significant income effects for males. Accordingly, for males the compensated taxable labor income elasticity is about 4 percentage points higher than the uncompensated one.
Keywords: Income taxation; hourly wage rates; work effort; taxable income (search for similar items in EconPapers)
JEL-codes: H24 J22 J31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2008-11-19
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (3)
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Related works:
Journal Article: Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates (2010) 
Working Paper: Hourly Wage Rate and Taxable Labor Income Responsiveness to Changes in Marginal Tax Rates (2009) 
Working Paper: Hourly Wage Rate and Taxable Labor Income Responsiveness to Changes in Marginal Tax Rates (2008) 
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:uufswp:2009_001
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