Tax aversion in labor supply

Kessler, Judd B.; Norton, Michael I.

doi:10.1016/j.jebo.2015.09.022

Cited by 48 publications

(49 citation statements)

References 40 publications

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“…Although both rates are high compared with average U.S. tax rates, they are comparable with average tax rates in some European countries (e.g., Denmark and Sweden). These tax rates are also comparable with rates utilized in prior experimental research (e.g., 50% in Kessler & Norton, ; 20–80% in Djanali & Sheehan‐Connor, ; 25% and 50% in Fochmann et al, ).…”

Section: Methodssupporting

confidence: 83%

“…Notably, our account for the consequences of income tax is not incompatible with any of the previously discussed findings (e.g., Djanali & Sheehan‐Connor, ; Fochmann et al, ; Kessler & Norton, ). Our framework suggests that the net effect of income tax on the motivation to work will depend partly on the prevalence of different attitudes toward redistribution and government intervention in the taxed population.…”

Section: Introductionsupporting

confidence: 70%

“…Our results suggest that the net effect of income tax on productivity partly depends on the distribution of attitudes toward redistribution and government intervention in the relevant population. Our conceptual framework may help to explain why previous tax experiments that utilized different samples reached different conclusions about the net influence of income tax on motivation (e.g., Djanali & Sheehan-Connor, 2012;Fochmann et al, 2013;Kessler & Norton, 2016).…”

Section: Discussionmentioning

confidence: 99%

“…A large body of research in macroeconomics has investigated this potential relationship but has drawn somewhat conflicting conclusions (e.g., Keane, ; Saez, Slemrod, & Giertz, ). Limited experimental research on the influence of income tax on effort has also documented opposing effects, with Kessler and Norton () finding negative effects of income tax on effort and Djanali and Sheehan‐Connor () and Fochmann, Weimann, Blaufus, Hundsdoerfer, and Kiesewetter () surprisingly finding positive effects.…”

Section: Introductionmentioning

confidence: 99%

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Income tax and the motivation to work

Rick

Paolacci

Burson

2018

Behavioral Decision Making

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Does income tax influence the motivation to work? We propose that the degree of effort exertion in the presence of income tax depends on people's attitudes toward two key components of taxation: redistribution and government intervention. For people favorable toward both, working while taxed is aligned with personal identity and may actually enhance motivation. All others, however, may find taxes demotivating. In two incentive‐compatible labor experiments, framing wages as subject to an income tax significantly increased productivity among people chronically favorable toward both redistribution and government intervention. For everyone else, taxes did not reliably influence productivity. An objectively equivalent intervention that did not redistribute a portion of participants' wages (framed as a wage “match” rather than a “tax”) did not motivate anyone to work harder. Our findings suggest that the net effect of income tax on productivity partly depends on the distribution of attitudes toward redistribution and government intervention.

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Section: Methodssupporting

confidence: 83%

Section: Introductionsupporting

confidence: 70%

Section: Discussionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Income tax and the motivation to work

Rick

Paolacci

Burson

2018

Behavioral Decision Making

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“…Further, the tax elasticity of labor supply plays a key role in determining the efficiency cost and revenue impacts of tax policy changes. We know that the tax elasticity of labor supply is generally larger than the wage elasticity: e.g., due to tax aversion (Kessler and Norton, 2015). This suggests that the labor-supply asymmetry with respect to tax-rate changes is likely to be more pronounced than what our findings for labor supply responses to wage changes suggest.…”

Section: Discussioncontrasting

confidence: 51%

Asymmetric Labor-Supply Responses to Wage-Rate Changes - Evidence from a Field Experiment

2016

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Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Asymmetric labor-supply responses to wage-rate changes. Evidence from a field experiment * Philipp Doerrenberg Denvil Duncan Max LöfflerJanuary 2016 AbstractThe standard labor-supply literature typically assumes that the labor supply response to wage increases is the same as that for equivalent wage decreases. However, evidence from the behavioral-economics literature suggests that people are loss averse and thus perceive losses differently than gains. This behavioral insight may imply that workers respond differently to wage increases than to wage decreases. We estimate the effect of wage increases and decreases on labor supply using a randomized field experiment with workers on Amazon's Mechanical Turk. The results provide evidence that wage increases have smaller effects than wage decreases, suggesting that the labor-supply response to wage changes is asymmetric. This finding is especially strong on the extensive margin where the elasticity for a wage decrease is twice that for a wage increase. These findings suggest that a reference-dependent utility function that incorporates loss aversion is the most appropriate way to model labor supply.

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Need-Based Justice and Distribution Procedures: The Perspective of Economics

Nicklisch

Paetzel

2020

Need-Based Distributive Justice

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Tax aversion in labor supply

Cited by 48 publications

References 40 publications

Income tax and the motivation to work

Income tax and the motivation to work

Asymmetric Labor-Supply Responses to Wage-Rate Changes - Evidence from a Field Experiment

Need-Based Justice and Distribution Procedures: The Perspective of Economics

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