Labor supply responses to income taxation among older couples evidence from a Canadian reform Derek Messacar
By: Messacar, Derek
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Material type: 
ArticleSubject(s): EMPLEO | POLITICA LABORAL | JUBILADOS | PENSIONES DE JUBILACIÓN | EDAD DE JUBILACION | IMPUESTOS | CANADA
In:
American Economic Journal : Economic Policy v. 16, n. 1, February 2024, p. 228-258Summary: I assess whether the tax code is a viable policy lever for influencing labor supply among older workers. Specifically, using administrative data from Canada, I estimate the earnings responses to a unique reform that lowered tax burdens for couples with a pensioner, using quasi-experimental methods. I find that workers decrease labor supply as tax bills decline but do not respond to changes in marginal tax rates. Hence, while public policy often aims to keep people in the workforce longer, there are conflicting effects of offering tax advantage for seniors on work incentives. I consider implications of these results for age-dependent taxation.
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I assess whether the tax code is a viable policy lever for influencing labor supply among older workers. Specifically, using administrative data from Canada, I estimate the earnings responses to a unique reform that lowered tax burdens for couples with a pensioner, using quasi-experimental methods. I find that workers decrease labor supply as tax bills decline but do not respond to changes in marginal tax rates. Hence, while public policy often aims to keep people in the workforce longer, there are conflicting effects of offering tax advantage for seniors on work incentives. I consider implications of these results for age-dependent taxation.
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