Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in Iceland

Sigurðsson, Jósef

doi:10.2139/ssrn.3278308

Cited by 14 publications

(29 citation statements)

References 58 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The labor supply effects of intertemporal incentive changes have also been analyzed in some quasi-experimental studies. Several studies using variation on tax holidays in Iceland and Switzerland report participation elasticities of a magnitude similar to that observed here (Martínez et al 2021;Sigurdsson 2019;Stefansson 2019). The evidence is not conclusive, however, as Bianchi et al (2001) found a participation elasticity of 0.42 when analyzing the tax-free year in Iceland.…”

Section: Discussionsupporting

confidence: 82%

Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment

2021

View full text Add to dashboard Cite

This paper provides evidence that replacing minimum unemployment benefts with a basic income of equal size has minor employment effects at best. We examine an experiment in Finland in which 2,000 beneft recipients were randomized to receive a monthly basic income. The experiment lowered participation tax rates by 23pp for full-time employment. Despite the considerable increase in work incentives, days in employment remained statistically unchanged in the frst year of the experiment. Moreover, even though all job search requirements were waived, participation in reemployment services remained high.

show abstract

Section: Discussionsupporting

confidence: 82%

Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment

2021

View full text Add to dashboard Cite

show abstract

“…Intriguingly, some studies have found larger real labor supply responses to tax cuts in specific related contexts. The Iceland tax holiday generated larger effects than the Swiss tax holiday (Bianchi et al, 2001;Sigurdsson, 2018). Tazhitdinova (2017) finds a large response to taking small second jobs after they became tax-free in Germany in 2003.…”

Section: Discussionmentioning

confidence: 97%

“…Closest to our study, Bianchi et al (2001), Sigurdsson (2018), and Stefansson (2019) exploit the one-year tax holiday in Iceland produced by a transition from an income tax based on prior year income to a pay as you earn income tax in 1987. Using a small survey dataset, Bianchi et al (2001) report large effects with an implied Frisch elasticity of .42 along the extensive margin.…”

mentioning

confidence: 99%

“…But it is difficult to disentangle the tax effects from the business cycle effect in this study as the tax holiday corresponded to the peak year of the business cycle in Iceland (see their Figures 1 and 2, p. 1565). Sigurdsson (2018) builds a population wide earnings dataset to study the same reform. Using labor supply participation patterns by age, he finds a much smaller extensive-margin Frisch elasticity .1.…”

mentioning

confidence: 99%

See 1 more Smart Citation

Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

Martínez

Saez

Siegenthaler

2021

American Economic Review

View full text Add to dashboard Cite

This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an income tax system based on the previous two years’ income to a standard annual pay as you earn system, leaving two years of income untaxed. We find significant but quantitatively very small responses of wage earnings with an intertemporal elasticity of 0.025 overall. High wage income earners and especially the self-employed display larger responses with elasticities around 0.1 and 0.25, respectively, most likely driven by tax avoidance. We find no effects along the extensive margin at all. (JEL H24, H26, J22, J23, J31, R23)

show abstract

Section: Discussionmentioning

confidence: 99%

Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

Martínez

Saez

Siegenthaler

2018

View full text Add to dashboard Cite

The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. At least one co-author has disclosed a financial relationship of potential relevance for this research. Further information is available online at http://www.nber.org/papers/w24634.ack NBER working papers are circulated for discussion and comment purposes. They have not been peerreviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

show abstract

Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in Iceland

Cited by 14 publications

References 58 publications

Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment

Removing Welfare Traps: Employment Responses in the Finnish Basic Income Experiment

Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

Contact Info

Product

Resources

About