Asymmetric labor supply responses to tax rate reform: Experimental evidence
Pfeil K, Kasper M, Necker S, Feld LP (2025)
Publication Type: Journal article
Publication year: 2025
Journal
Book Volume: 97
Article Number: 102810
DOI: 10.1016/j.labeco.2025.102810
Abstract
We study how individuals adjust their labor supply in response to tax reforms that alter income tax progressivity. In an online experiment with 522 participants, we compare responses to reforms that replace a progressive tax system with a flat tax and vice versa. We find asymmetric effects: labor supply increases when a progressive regime is replaced by a flat tax system, but does not decline when progressivity is introduced. This increase in labor provision occurs only when the reform lowers the marginal tax rate, not when it raises it. Our results suggest that labor supply responses to tax reforms are nuanced and path-dependent: reforms change behavior when they ease tax burdens for individuals who were previously discouraged from working more due to progressive thresholds.
Involved external institutions
Walter Eucken Institut
Germany (DE)
Münchener Gesellschaft zur Förderung der Wirtschaftswissenschaft - CESifo GmbH
Germany (DE)
Germany (DE)
Münchener Gesellschaft zur Förderung der Wirtschaftswissenschaft - CESifo GmbH
Germany (DE)
How to cite
APA:
Pfeil, K., Kasper, M., Necker, S., & Feld, L.P. (2025). Asymmetric labor supply responses to tax rate reform: Experimental evidence. Labour Economics, 97. https://doi.org/10.1016/j.labeco.2025.102810
MLA:
Pfeil, Katharina, et al. "Asymmetric labor supply responses to tax rate reform: Experimental evidence." Labour Economics 97 (2025).
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