Labor Supply Responses to Income Taxation among Older Couples: Evidence from a Canadian Reform

Derek Messacar

American Economic Journal: Economic Policy, 2024, vol. 16, issue 1, 228-58

Abstract: I assess whether the tax code is a viable policy lever for influencing labor supply among older workers. Specifically, using administrative data from Canada, I estimate the earnings responses to a unique reform that lowered tax burdens for couples with a pensioner, using quasi-experimental methods. I find that workers decrease labor supply as tax bills decline but do not respond to changes in marginal tax rates. Hence, while public policy often aims to keep people in the workforce longer, there are conflicting effects of offering tax advantage for seniors on work incentives. I consider implications of these results for age-dependent taxation.

JEL-codes: H24 H31 H55 J14 J22 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1257/pol.20210075

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