Tax Reform, Sector‐specific Labor Supply and Welfare Effects*

Abstract

This paper focuses in particular on the 1992 tax reform in Norway. In this reform the top marginal tax rates were cut considerably. We find that the impact on overall labor supply is rather modest, but these modest changes shadow for stronger sectoral changes. The tax reform stimulated the women to shift their labor from the public to the private sector and to work longer hours. A calculation of mean compensated variation, calculated within the framework of a random utility model, shows that the richest households benefited far more from the 1992 tax reform than did the poorest households. Copyright � The editors of the "Scandinavian Journal of Economics" 2009. .

Absenteeism, Efficiency Wages, and Marginal Taxes

“…In public economics, one of the major questions is how tax rates affect human behaviour. A multitude of studies have focused on earnings and labour supply responses to the implementation of tax reforms (e.g., Aaberge et al ., ; Blundell et al ., ; Gruber and Saez, ; Dagsvik et al ., ). The current consensus is that the relationship between the level of taxation, on the one hand, and the labour supply of prime‐age male workers, on the other hand, is small.…”

Teaching the macroeconomic effects of tax cuts with a quasi-experiment

“…The pioneering studies of Lindsay (1987) and Feldstein (1995) argued that income elasticity in regards to tax changes is much higher than that suggested by the labor literature. Later studies such as Gruber and Saez (2002) and Caroll (1998) Dagsvik et al (2009) examine the 1992 tax reform in Norway. They find that the impact of marginal tax cut on overall labor supply is rather modest, but these modest changes shadow for stronger sectorial changes.…”

Making work pay in Croatia: An exante evaluation of two in-work benefits using miCROmod

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