Iceland's Natural Experiment in Supply-Side Economics
The move to a pay-as-you-earn income tax system in Iceland in 1987-1988 made income earned in 1987 tax-free. Using a sample of 9,274 individuals for the years 1986, 1987 and 1988, we calculate the labour-supply response of this change and find that total labour supply rose by 6.7% in 1987 over the average of 1986 and 1988 when we correct for entry in 1988. This consists of an 8.6% increase in weeks supplied by those already in the labour market in 1986 and a 1.9% decline due to entry/exit. The elasticity of weeks worked to the rise in after-tax wages was 0.41 for men and 0.11 for women. While the participation rate of women increased somewhat in our sample, participation by men fell.
|Date of creation:||Jan 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Don Fullerton, 1980.
"On the Possibility of an Inverse Relationship between Tax Rates and Government Revenues,"
NBER Working Papers
0467, National Bureau of Economic Research, Inc.
- Fullerton, Don, 1982. "On the possibility of an inverse relationship between tax rates and government revenues," Journal of Public Economics, Elsevier, vol. 19(1), pages 3-22, October.
- Jerry A. Hausman, 1983.
"Stochastic Problems in the Simulation of Labor Supply,"
in: Behavioral Simulation Methods in Tax Policy Analysis, pages 47-82
National Bureau of Economic Research, Inc.
- Jerry A. Hausman, 1981. "Stochastic Problems in the Simulation of Labor Supply," NBER Working Papers 0788, National Bureau of Economic Research, Inc.
- Feldstein, Martin, 1986.
"Supply Side Economics: Old Truths and New Claims,"
American Economic Review,
American Economic Association, vol. 76(2), pages 26-30, May.
- 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.
- Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2367. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.