Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

90 Pages Posted: 25 May 2018 Last revised: 24 Apr 2021

See all articles by Isabel Martinez

Isabel Martinez

University of St. Gallen

Emmanuel Saez

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Michael Siegenthaler

ETH Zürich - KOF Swiss Economic Institute

Date Written: May 2018

Abstract

This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an income tax system based on the previous two years' income to a standard annual pay as you earn system, leaving two years of income untaxed. We find significant but quantitatively very small responses of wage earnings with an inter-temporal elasticity of .025 overall. High wage income earners and especially the self-employed display larger responses with elasticities around .1 and .25 respectively, most likely driven by tax avoidance. We find no effects along the extensive margin at all.

Suggested Citation

Martinez, Isabel and Saez, Emmanuel and Siegenthaler, Michael, Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays (May 2018). NBER Working Paper No. w24634, Available at SSRN: https://ssrn.com/abstract=3182230

Isabel Martinez (Contact Author)

University of St. Gallen ( email )

Varnbuelstr. 14
Saint Gallen, St. Gallen CH-9000
Switzerland

Emmanuel Saez

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States
510-642-4631 (Phone)
510-642-6615 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Michael Siegenthaler

ETH Zürich - KOF Swiss Economic Institute ( email )

Zurich
Switzerland

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