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The Detaxation of Overtime Hours: Lessons from the French Experiment

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  • Cahuc, Pierre
  • Carcillo, Stéphane

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

  • Cahuc, Pierre & Carcillo, Stéphane, 2011. "The Detaxation of Overtime Hours: Lessons from the French Experiment," CEPR Discussion Papers 8217, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8217
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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.
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    3. 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.
    4. Thomas Bauer & Klaus F. Zimmermann, 1999. "Overtime Work and Overtime Compensation in Germany," Scottish Journal of Political Economy, Scottish Economic Society, vol. 46(4), pages 419-436, September.
    5. 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.
    6. 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.
    7. 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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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Another French experiment with work hours going bad
      by Economic Logician in Economic Logic on 2011-03-07 21:13:00

    Citations

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    Cited by:

    1. Marie-Louise Leroux & Gregory Ponthiere, 2018. "Working time regulation, unequal lifetimes and fairness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 51(3), pages 437-464, October.
    2. Ronald L. Oaxaca & Galiya Sagyndykova, 2020. "The effect of overtime regulations on employment," IZA World of Labor, Institute of Labor Economics (IZA), pages 1-89, December.
    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. 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.
    5. Erwin Ooghe, 2020. "Conditional Earnings Subsidies for Low Earners," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(2), pages 524-552, April.
    6. 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.
    7. Martins, Pedro S., 2016. "Can Overtime Premium Flexibility Promote Employment? Firm- and Worker-Level Evidence from a Labour Law Reform," IZA Discussion Papers 10205, Institute of Labor Economics (IZA).
    8. Vincent Charlet & Philippe Frocrain, 2017. "Les limites des allégements de charges sur les bas salaires," Working Papers hal-01695167, HAL.
    9. 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.
    10. 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).
    11. Olivier Godechot, 2009. "L'Alsace-Moselle peut-elle décider des 35 heures ?," Post-Print hal-01391560, HAL.

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    More about this item

    Keywords

    overtime hours; Tax exemption; working time;
    All these keywords.

    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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