Labour Supply Responses to Income Tax Changes in Spain

Juan Alberto Sanchis Llopis () and Antonio Cutanda ()
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Juan Alberto Sanchis Llopis: Universidad de Valencia
Antonio Cutanda: Universidad de Valencia and ERICES

Hacienda Pública Española / Review of Public Economics, 2023, vol. 245, issue 2, 71-94

Abstract: This paper simulates the response of the Spanish labour supply to income tax changes using estimates for the intertemporal elasticity of substitution of leisure, calculated using a pseudo-panel built combining information from the EPA and the ECPF, for the period 1987-1997. According to our findings, income tax reforms have an impact on Spanish labour market, although the effects are quite small, making this mechanism a restricted tool for addressing the country’s existing social security system deficit. Further, labour responses differ for men and women, across workers’ age, as well as between permanent and fixed-term contract workers.

Keywords: Labour supply; Labour income tax; Intertemporal elasticity of substitution of leisure; Simulations. (search for similar items in EconPapers)
JEL-codes: E62 H24 H31 J22 (search for similar items in EconPapers)
Date: 2023
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