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Pré-Publication, Document De Travail Année : 2012

Labor Income Responds Differently to Income-Tax and Payroll-Tax Reforms

Résumé

We estimate the responses of gross labor income with respect to marginal and average net-oftax rates in France over the period 2003-2006. We exploit a series of reforms to the income-tax and payroll-tax schedules affecting individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor income with respect to the marginal net-of-income-tax rate is around 0.2, while we find no response to the marginal net-of-payroll-tax rate. The elasticity with respect to the average net-of-tax rate is not significant for the income-tax schedule, while it is close to -1 for the payroll-tax schedule. A plausible explanation is the existence of significant labor supply responses to the income-tax schedule, combined with sticky posted wages (i.e., the gross labor income minus payroll taxes divided by hours worked). Finally, the effect of the net-of-income-tax rate seems to be driven by participation decisions, in particular those of married women.
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Dates et versions

halshs-00856246 , version 1 (30-08-2013)

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  • HAL Id : halshs-00856246 , version 1

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Etienne Lehmann, François Marical, Laurence Rioux. Labor Income Responds Differently to Income-Tax and Payroll-Tax Reforms. 2012. ⟨halshs-00856246⟩
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