IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp18870.html

Tax Misperceptions and Labor Supply: A Randomized Information Experiment

Author

Listed:
  • Dur, Robert

    (Erasmus University Rotterdam)

  • Harms, Job

    (Ministry of Finance, The Netherlands)

  • Non, Arjan

    (Erasmus University Rotterdam, Tinbergen Institute, and CESifo)

Abstract

In countries with a complex tax system, it is difficult for people to correctly assess their effective marginal tax rate, which in turn can have important consequences for labor supply. We conduct a two-wave randomized survey experiment among a representative sample of the Dutch working-age population (N≈2,000) to assess what misperceptions people have and whether addressing those misperceptions via an information intervention affects their labor supply. Our data show that people with low income greatly overestimate their marginal tax rate, while people with high income tend to slightly underestimate it. The information intervention results in more accurate perceptions of the effective marginal tax rate two months after treatment. Work hours of those who initially overestimated their marginal tax rate increase by 1.5 hours per week as a result of the information treatment. The implied compensated wage elasticity of labor supply is +0.3. The effect is concentrated among those who indicate in the first wave that they face no restrictions to increase their work hours. The information intervention reduces income inequality.

Suggested Citation

  • Dur, Robert & Harms, Job & Non, Arjan, 2026. "Tax Misperceptions and Labor Supply: A Randomized Information Experiment," IZA Discussion Papers 18870, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18870
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp18870.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp18870. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Fallak (email available below). General contact details of provider: https://edirc.repec.org/data/izaaalu.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.