Labor Supply Responses to Income Taxation among Older Couples: Evidence from a Canadian Reform
American Economic Journal: Economic Policy
vol. 16,
no. 1, February 2024
(pp. 228-58)
Abstract
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.Citation
Messacar, Derek. 2024. "Labor Supply Responses to Income Taxation among Older Couples: Evidence from a Canadian Reform." American Economic Journal: Economic Policy, 16 (1): 228-58. DOI: 10.1257/pol.20210075Additional Materials
JEL Classification
- H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- H55 Social Security and Public Pensions
- J14 Economics of the Elderly; Economics of the Handicapped; Non-labor Market Discrimination
- J22 Time Allocation and Labor Supply
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