IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Does Labor Supply Respond to a Flat Tax? Evidence from the Russian Tax Reform

We exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on labor supply of males and females. We apply the weighted difference-in-difference regression approach and instrumental variables to the labor supply function estimated on individual panel data. The mean regression results indicate that the tax reform led to a statistically significant increase in male hours of work but had no effect on that of females. However, we find a positive response to tax changes at both tails of the female hour distribution. We also find that the reform increased the probability of finding a job among both males and females. Despite significant variation in individual responses, the aggregate labor supply elasticities are trivial and suggest that reform-induced changes in labor supply were an unlikely explanation for the amplified personal income tax revenues that followed the reform.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://icepp.gsu.edu/sites/default/files/documents/icepp/wp/ispwp0906.pdf
Download Restriction: no

Paper provided by International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University in its series International Center for Public Policy Working Paper Series, at AYSPS, GSU with number paper0906.

as
in new window

Length: 56 pages
Date of creation: 01 Jun 2009
Date of revision:
Handle: RePEc:ays:ispwps:paper0906
Contact details of provider: Phone: 404-413-0235
Fax: 404-413-0244
Web page: http://aysps.gsu.edu/isp/index.html

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Yuriy Gorodnichenko & Jorge Martinez-Vazquez & Klara Sabirianova Peter, 2009. "Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 504-554, 06.
  2. Yuriy Gorodnichenko & Klara Sabirianova Peter & Dmitriy Stolyarov, 2010. "Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 209-237, January.
  3. Joseph G. Altonji & Christina H. Paxson, 1992. "Labor Supply, Hours Constraints, and Job Mobility," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 256-278.
  4. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
  5. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
  6. John Pencavel, 2002. "A Cohort Analysis of the Association between Work Hours and Wages among Men," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 251-274.
  7. Aitken, Brian & Harrison, Ann & DEC, 1994. "Do domestic firms benefit from foreign direct investment? Evidence from panel data," Policy Research Working Paper Series 1248, The World Bank.
  8. Kumar, Anil, 2008. "Labor supply, deadweight loss and tax reform act of 1986: A nonparametric evaluation using panel data," Journal of Public Economics, Elsevier, vol. 92(1-2), pages 236-253, February.
  9. Matveenko Vladimir & Saveliev Peter, 2005. "Labor Supply in Russia: Studying the Role of Outside Options of the Employed," EERC Working Paper Series 00-215e, EERC Research Network, Russia and CIS.
  10. Costas Meghir & David Phillips, 2008. "Labour supply and taxes," IFS Working Papers W08/04, Institute for Fiscal Studies.
  11. Jorge Martinez-Vazquez & Mark Rider & Riatu Qibthiyyah & Sally Wallace, 2006. "Who Bears the Burden of Taxes on Labor Income in Russia?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0621, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  12. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-59, October.
  13. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
  14. Immervoll, Herwig & Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare Reform in European Countries: A Micro-Simulation Analysis," CEPR Discussion Papers 4324, C.E.P.R. Discussion Papers.
  15. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
  16. Haddad, Mona & Harrison, Ann, 1993. "Are there positive spillovers from direct foreign investment? : Evidence from panel data for Morocco," Journal of Development Economics, Elsevier, vol. 42(1), pages 51-74, October.
  17. Karen Smith Conway, 1997. "Labor Supply, Taxes, And Government Spending: A Microeconometric Analysis," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 50-67, February.
  18. Feldstein, Martin, 1995. "The Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 551-72, June.
  19. Tito Boeri & Katherine Terrell, 2002. "Institutional Determinants of Labor Reallocation in Transition," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 51-76, Winter.
  20. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  21. Anna Ivanova & Michael Keen & Alexander Klemm, 2005. "The Russian ‘flat tax’ reform," Economic Policy, CEPR;CES;MSH, vol. 20(43), pages 397-444, 07.
  22. Sanjit Dhami & Ali al-Nowaihi, 2005. "Why Do People Pay Taxes? Prospect Theory Versus Expected Utility Theory," Discussion Papers in Economics 05/23, Department of Economics, University of Leicester, revised Aug 2006.
  23. Chul-In Lee, 2001. "Finite Sample Bias In Iv Estimation Of Intertemporal Labor Supply Models: Is The Intertemporal Substitution Elasticity Really Small?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 638-646, November.
  24. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-54, March.
  25. Klara Sabirianova & Jan Svejnar & Katherine Terrell, 2005. "Distance to the Efficiency Frontier and Foreign Direct Investment Spillovers," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 576-586, 04/05.
  26. Arellano, M, 1987. "Computing Robust Standard Errors for Within-Groups Estimators," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 431-34, November.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ays:ispwps:paper0906. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Benson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.