American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays
American Economic Review
vol. 111,
no. 2, February 2021
(pp. 506–46)
Abstract
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.Citation
Martínez, Isabel Z., Emmanuel Saez, and Michael Siegenthaler. 2021. "Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays." American Economic Review, 111 (2): 506–46. DOI: 10.1257/aer.20180746Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H26 Tax Evasion and Avoidance
- J22 Time Allocation and Labor Supply
- J23 Labor Demand
- J31 Wage Level and Structure; Wage Differentials
- R23 Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics