Increasing Hours Worked: Moonlighting Responses to a Large Tax Reform

63 Pages Posted: 4 Oct 2017 Last revised: 13 Jan 2021

See all articles by Alisa Tazhitdinova

Alisa Tazhitdinova

University of California, Santa Barbara (UCSB)

Multiple version iconThere are 2 versions of this paper

Date Written: October 3, 2017

Abstract

Moonlighting is increasingly popular in OECD countries, with 5 to 10% of workers holding two or more jobs. However, little is known about the responsiveness of moonlighting to financial incentives due to the lack of identifying variation. This paper studies a unique reform in Germany that allowed workers to hold small secondary jobs tax-free, decreasing the marginal tax rate by between 19.5 to 66pp. I show that the reform resulted in a dramatic increase in moonlighting that was not offset by reductions in primary earnings, and that hours constraints are a key determinant of moonlighting.

Keywords: multiple job holding, moonlighting, payroll tax, income tax

JEL Classification: H24, J22

Suggested Citation

Tazhitdinova, Alisa, Increasing Hours Worked: Moonlighting Responses to a Large Tax Reform (October 3, 2017). Available at SSRN: https://ssrn.com/abstract=3047332 or http://dx.doi.org/10.2139/ssrn.3047332

Alisa Tazhitdinova (Contact Author)

University of California, Santa Barbara (UCSB) ( email )

Santa Barbara, CA 93106
United States

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