Asymmetric labor supply responses to taxation

Anna Esslinger, Katharina Pfeil and Lars Feld

No 25/7, Freiburg Discussion Papers on Constitutional Economics from Walter Eucken Institut e.V.

Abstract: Are the effects of tax aversion on labor supply symmetric? In a real-effort online experiment, participants are exposed to manipulated wages and taxes after first experiencing the same reference wage. We find no significant differences in their productivity; however, we find significant asymmetries in fairness perceptions of the treatments. We find that tax increases are viewed as more unfair than equivalent wage decreases and tax decreases are viewed as more fair than equivalent wage increases. Additionally, the negative effect of tax increases is larger than the positive effect of tax decreases. However, we find little to no evidence that these asymmetric fairness perceptions significantly shape working behavior.

Keywords: Tax Aversion; Loss Aversion; Labor Supply Asymmetry; Online Experiment (search for similar items in EconPapers)
JEL-codes: D91 H20 H30 J22 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-lma, nep-pbe and nep-pub
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https://www.econstor.eu/bitstream/10419/323932/1/1932888330.pdf (application/pdf)

Related works:
Working Paper: Asymmetric Labor Supply Responses to Taxation (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:aluord:323932

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