Income Responses to Tax Changes - Evidence from the Norwegian Tax Reform
Several studies, conducted on U.S. data, have found rather strong income responses to changes in marginal tax rates, when treating tax reforms as "natural experiments" and applying the differences-of-differences estimator on individual income data. The Norwegian tax reform of 1992 implied substantial increases in the net-of-tax rate (1 minus the change in the marginal tax rate) for high-income earners, and this paper provides measures of the elasticity of taxable income with respect to these tax rate changes. The natural experiment assumption of the differences-of-differences approach is discussed. Since the tax reform implied other tax changes and both demographic variables and shifting macroeconomic conditions might impact on income growth, we include other explanatory variables in addition to the net-of-tax rate changes. When including other explanatory variables, tax elasticity estimates are affected, but only modestly. Our estimates of the elasticity of taxable income due to changes in the marginal net-of-tax rate range from about -0.20 to about 0.14.
|Date of creation:||Sep 1999|
|Date of revision:|
|Contact details of provider:|| Postal: P.O.Box 8131 Dep, N-0033 Oslo, Norway|
Phone: (+47) 21 09 00 00
Fax: (+47) 21 09 49 73
Web page: http://www.ssb.no/en/
More information through EDIRC
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.:
- Richard Blundell & Alan Duncan & Costas Meghir, 1998.
"Estimating Labor Supply Responses Using Tax Reforms,"
Econometric Society, vol. 66(4), pages 827-862, July.
- Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
- Robert A. Moffitt & Mark Wilhelm, 1998.
"Taxation and the Labor Supply: Decisions of the Affluent,"
NBER Working Papers
6621, National Bureau of Economic Research, Inc.
- Robert A Moffitt & Mark Wilhelm, 2000. "Taxation and the Labor Supply - Decisions of the Affluent," Economics Working Paper Archive 414, The Johns Hopkins University,Department of Economics.
- Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-59, December.
- Karl Ove Aarbu & Thor Olav Thoresen, 1997. "The Norwegian Tax Reform; Distributional Effects and the High-income Response," Discussion Papers 207, Statistics Norway, Research Department.
- Blundell, Richard & Macurdy, Thomas, 1999.
"Labor supply: A review of alternative approaches,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695
- Slemrod, Joel, 1998. "Methodological Issues in Measuring and Interpreting Taxable Income Elasticities," National Tax Journal, National Tax Association, vol. 51(n. 4), pages 773-88, December.
- Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
- Austan Goolsbee, 1998. "It's Not About the Money: Why Natural Experiments Don't Work on the Rich," NBER Working Papers 6395, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:ssb:dispap:260. 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: (J Bruusgaard)
If references are entirely missing, you can add them using this form.