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Asymmetric labor supply responses to taxation

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  • Esslinger, Anna
  • Pfeil, Katharina
  • Feld, Lars P.

Abstract

Are the effects of tax aversion on labor supply symmetric? In a real-effort online experiment, participants are exposed to manipulated wages and taxes after first experiencing the same reference wage. We find no significant differences in their productivity; however, we find significant asymmetries in fairness perceptions of the treatments. We find that tax increases are viewed as more unfair than equivalent wage decreases and tax decreases are viewed as more fair than equivalent wage increases. Additionally, the negative effect of tax increases is larger than the positive effect of tax decreases. However, we find little to no evidence that these asymmetric fairness perceptions significantly shape working behavior.

Suggested Citation

  • Esslinger, Anna & Pfeil, Katharina & Feld, Lars P., 2025. "Asymmetric labor supply responses to taxation," Freiburg Discussion Papers on Constitutional Economics 25/7, Walter Eucken Institut e.V..
    • Handle: RePEc:zbw:aluord:323932
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    Keywords

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    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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