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The Detaxation of Overtime Hours: Lessons from the French Experiment

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  • Pierre Cahuc
  • Stéphane Carcillo

Abstract

In October 2007, France introduced an exemption on the income tax and social security contributions that applied to wages received for hours worked overtime. The goal of the policy was to increase the number of hours worked. This article shows that this reform has had no significant impact on hours worked. Conversely, it has had a positive impact on the overtime hours declared by highly qualified wage earners, who have opportunities to manipulate the overtime hours they declare in order to optimize their tax situation since the hours they work are difficult to verify.

Suggested Citation

  • Pierre Cahuc & Stéphane Carcillo, 2014. "The Detaxation of Overtime Hours: Lessons from the French Experiment," Journal of Labor Economics, University of Chicago Press, vol. 32(2), pages 361-400.
  • Handle: RePEc:ucp:jlabec:doi:10.1086/674987
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    References listed on IDEAS

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    1. Matthieu Chemin & Etienne Wasmer, 2009. "Using Alsace-Moselle Local Laws to Build a Difference-in-Differences Estimation Strategy of the Employment Effects of the 35-Hour Workweek Regulation in France," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 487-524, October.
    2. Stephen J. Trejo, 2003. "Does the Statutory Overtime Premium Discourage Long Workweeks?," ILR Review, Cornell University, ILR School, vol. 56(3), pages 530-551, April.
    3. Sandmo, Agnar, 1981. "Income tax evasion, labour supply, and the equity--efficiency tradeoff," Journal of Public Economics, Elsevier, vol. 16(3), pages 265-288, December.
    4. Bauer, Thomas & Zimmermann, Klaus F, 1999. "Overtime Work and Overtime Compensation in Germany," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(4), pages 419-436, September.
    5. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    6. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2016. "Why Can Modern Governments Tax So Much? An Agency Model of Firms as Fiscal Intermediaries," Economica, London School of Economics and Political Science, vol. 83(330), pages 219-246, April.
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    Citations

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    Cited by:

    1. Marie-Louise Leroux & Grégory Ponthiere, 2016. "Working Time Regulation, Unequal Lifetimes and Fairness," Cahiers de recherche 1611, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    2. Ronald L. Oaxaca, 2014. "The effect of overtime regulations on employment," IZA World of Labor, Institute for the Study of Labor (IZA), pages 1-89, October.
    3. Olivier Godechot, 2016. "L'Alsace-Moselle peut-elle décider des 35 heures ?: Commentaires sur l'article de Matthieu Chemin et Etienne Wasmer, Journal of Labor Economics, 2009," Sciences Po publications 2016-04, Sciences Po.
    4. Pedro S. Martins, 2016. "Can overtime premium flexibility promote employment? Firm-and worker-level evidence from a labour law reform," FEUNL Working Paper Series wp607, Universidade Nova de Lisboa, Faculdade de Economia.
    5. Philippe Askenazy, 2013. "Working time regulation in France from 1996 to 2012," Cambridge Journal of Economics, Oxford University Press, vol. 37(2), pages 323-347.
    6. Vincent Charlet & Philippe Frocrain, 2017. "Les limites des allégements de charges sur les bas salaires," Working Papers hal-01695167, HAL.
    7. Kawaguchi, Daiji & Naito, Hisahiro & Yokoyama, Izumi, 2017. "Assessing the effects of reducing standard hours: Regression discontinuity evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 43(C), pages 59-76.
    8. Nicolas Roys, 2016. "Persistence of Shocks and the Reallocation of Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 22, pages 109-130, October.
    9. Martins, Pedro S., 2017. "Economic effects of overtime premium flexibility: Firm- and worker-level evidence from a law reform," GLO Discussion Paper Series 102, Global Labor Organization (GLO).
    10. Olivier Godechot, 2009. "L'Alsace-Moselle peut-elle décider des 35 heures ?," Post-Print hal-01391560, HAL.

    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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