Experimental Evidence of Tax Framing Effects on the Work/Leisure Decision

32 Pages Posted: 25 Jun 2010 Last revised: 14 Apr 2018

See all articles by David Gamage

David Gamage

Indiana University Maurer School of Law

Andrew T. Hayashi

University of Virginia School of Law

Brent K. Nakamura

University of California, Berkeley

Date Written: June 24, 2010

Abstract

We report results from an experiment designed to evaluate the impact of different descriptions of the after-tax wage on both (1) subjects’ willingness to perform a work task rather than an alternative leisure option, and (2) the amount of work performed by those subjects selecting the work task. Utilizing an experimental design that facilitates both within and between-subject comparisons, we find that subjects’ willingness to work varies with the framing of the after-tax wage and that, in particular, subjects are much less willing to work when the returns to work are framed as a low wage plus a bonus than when the returns are described as a high wage minus a tax. Along the intensive margin we find suggestive evidence that subjects stop working just before their wage becomes subject to a significantly higher marginal tax rate, but we do not observe similar clustering when gross wages become subject to an equivalent wage decrease that is not described as a tax increase.

Keywords: Experiment, Framing, Labor Supply, Taxation

JEL Classification: C91, D03, H20, J22

Suggested Citation

Gamage, David and Hayashi, Andrew T. and Nakamura, Brent K., Experimental Evidence of Tax Framing Effects on the Work/Leisure Decision (June 24, 2010). Available at SSRN: https://ssrn.com/abstract=1629919 or http://dx.doi.org/10.2139/ssrn.1629919

David Gamage (Contact Author)

Indiana University Maurer School of Law ( email )

211 S. Indiana Avenue
Bloomington, IN 47405
United States

HOME PAGE: http://www.law.indiana.edu/about/people/bio.php?name=gamage-david

Andrew T. Hayashi

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Brent K. Nakamura

University of California, Berkeley ( email )

Jurisprudence and Social Policy Program
2240 Piedmont Avenue
Berkeley, CA 94720-2150
United States

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