TY - JOUR
T1 - Labor supply responses to learning the tax and benefit schedule
AU - Kostøl, Andreas R.
AU - Myhre, Andreas S.
N1 - Funding Information:
* Kostøl: Department of Economics, Arizona State University; Statistics Norway; IZA (email: andreas. kostol@asu.edu); Myhre: Norwegian Welfare Administration; Statistics Norway (email: a.s.myhre@econ.uio.no). Henrik Kleven was the coeditor for this article. We would like to thank Esteban Aucejo, Richard Blundell, Erlend Eide Bø, Sigurd Galaasen, Francois Gerard, Jonas Hjort, Hans Hvide, Damon Jones, Patrick Kline, Camille Landais, Edwin Leuven, Andrew McCallum, Jan Nimczik, Nathan Seegert, Dan Silverman, Ola Vestad, Nicholas Vreugdenhil, Andrea Weber, participants at several seminars and workshops, and three anonymous referees for valuable suggestions and guidance. Matthew Merkle provided excellent research assistance. This project received financial support from the Norwegian Welfare Administration and the President of ASU’s Strategic Initiative Fund. The findings and conclusions expressed are solely those of the authors and do not represent the views of the Norwegian Welfare Administration. Any remaining errors are our own.
Publisher Copyright:
© 2021 American Economic Association. All rights reserved.
PY - 2021/11
Y1 - 2021/11
N2 - 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. (JEL D83, H24, I38, J22, J28, J31).
AB - 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. (JEL D83, H24, I38, J22, J28, J31).
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U2 - 10.1257/aer.20201877
DO - 10.1257/aer.20201877
M3 - Article
AN - SCOPUS:85119214400
SN - 0002-8282
VL - 111
SP - 3733
EP - 3766
JO - American Economic Review
JF - American Economic Review
IS - 11
ER -