Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in Iceland

• 成果类型: Article
• 署名作者: Sigurdsson, Josef
• 署名单位: Stockholm University; IZA Institute Labor Economics
• 刊物名称: AMERICAN ECONOMIC JOURNAL-ECONOMIC POLICY
• ISSN/ISSBN: 1945-7731
• DOI: 10.1257/pol.20220386
• 发表日期: 2025
• 关键词: taxable income; natural experiment; indivisible labor; hours constraints; rates; MODEL; elasticities; micro; wages; panel

摘要

Labor income earned in Iceland in 1987 went untaxed. I use this episode to study labor supply responses to temporary wage changes. Using a population-wide dataset of earnings and working time and two identification strategies, I estimate intensive and extensive margin Frisch elasticities of 0.4 and 0.09, respectively. Workers with the ability to adjust drive these average responses: extensive margin by young and close-to-retirement cohorts and intensive margin responses by workers in temporally flexible jobs, though secondary jobs contribute to one-tenth of the response. The results suggest that adjustment frictions may similarly explain differences in elasticities within and across countries. (JEL H24, H31, J22)