Labor Supply Responses to Learning the Tax and Benefit Schedule
Andreas R. Kostøl, Andreas S. Myhre
American Economic Review · 2021 · Volume 111 · Issue 11
Abstract
Despite the implications for policy, empirical evidence on the relative importance of factors that shape labor supply responses is missing. This paper helps fill this gap and quantifies the role of information frictions versus other frictions by combining notches in the Norwegian welfare system and quasi-experimental variation in access to information about the slope and location of kinks. While we estimate a frictionless elasticity of 0.3, overall frictions attenuate this elasticity by about 70 percent. We find the information letter increased the earnings elasticity from 0.06 to 0.15, implying that information frictions account for at least 30 percent of total attenuation.
Keywords
Search, Learning, Information and Knowledge, Communication, Belief, Unawareness, Personal Income and Other Nonbusiness Taxes and Subsidies, includes inheritance and gift taxes, Welfare, Well-Being, and Poverty: Government Programs, Provision and Effects of Welfare Programs, Time Allocation and Labor Supply, Safety, Job Satisfaction, Related Public Policy, Wage Level and Structure, Wage Differentials
Enable JavaScript for citation tools and additional paper interactions.