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The effect of age-targeted tax credits on labor force participation of older workers

Lisa Laun ()

Journal of Public Economics, 2017, vol. 152, issue C, 102-118

Abstract: I analyze the effect of income tax policy changes on labor force participation of older workers. I exploit two age-targeted policy initiatives to promote work at older ages simultaneously implemented in Sweden in 2007: an earned income tax credit and a payroll tax credit for workers above age 65. Using an age-based discontinuity in eligibility criteria, I conduct a difference-in-differences analysis with the reform as an instrument for the net-of-tax rate. I find a participation elasticity with respect to the net-of-participation-tax rate of about 0.22 in the year following the 65th birthday for individuals who were working four years earlier.

Keywords: Labor supply; Retirement; Earned income tax credit; Payroll taxes (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:pubeco:v:152:y:2017:i:c:p:102-118