Comparing Labor Supply Elasticities in Europe and the US: New Results

Abstract

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Tax incentives and family labor supply in Austria

“…As table 9 depicts for each subgroup, the increase in total working hours is clearly driven by the extensive margin, thus confirming recent results in Bargain et al (2011).…”

“…The presented elasticities for men and women in couples are almost identical to the results for Austria reported in Bargain et al (2011). While the hours elasticity for single men is in a comparable range, our estimates for (Steiner and Wrohlich, 2004;Peichl et al, 2010) or Belgium (Orsini, 2006), are in similar ranges.…”

“…While Bargain et al (2011) argue that the majority of the variation in elasticities is driven by the choice of estimation method, they additionally mention the selection of relevant population groups and time periods as well as different types of data as potential sources. As a proposed remedy they estimate static labor supply elasticities for Europe and the US based on a common discrete choice framework.…”

Microsimulation and Policy Analysis

“…Figure 5 shows the estimated ownwage elasticities for single individuals and individuals in couples, which suggest substantial scope for the potential impact of tax-benefit reforms on labour supply and hence income distribution, though the differences across countries are found to be smaller with respect to those in previous studies. Bargain et al (2014) also show the extent to which labour supply elasticities vary with income level which has important implications for the analysis of the equity-efficiency trade off inherent in tax-benefit reforms. To this aim, labour supply models can be used to implement a computational approach to the optimal taxation problem, allowing the empirical identification of the optimal income tax rules according to various social welfare criteria under the constraint of revenue neutrality (Aaberge and Colombino, 2013).…”

“…Immervoll et al, 2007). Using EUROMOD and TAXSIM, Bargain et al (2014) provide the first largescale international comparison of labour supply elasticities including 17 EU countries and the US. The use of a harmonised approach provides results that are more robust to possible measurement differences that would otherwise arise from the use of different data, microsimulation models and methodological choices.…”