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

Open access
Date
2021-02Type
- Journal Article
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 inter-temporal elasticity of .025 overall. High wage income earners and especially the self-employed display larger responses with elasticities around .1 and .25 respectively, most likely driven by tax avoidance. We find no effects along the extensive margin at all. Show more
Permanent link
https://doi.org/10.3929/ethz-b-000447760Publication status
publishedExternal links
Journal / series
American Economic ReviewVolume
Pages / Article No.
Publisher
American Economic AssociationSubject
Tax holidays; Labor supply; Frisch elasticity; Intertemporal labor supply elasticity; Income shifting; Income taxes; Tax avoidanceOrganisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
06330 - KOF FB Konjunktur / KOF Macroeconomic forecasting
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