Within-Year Uncertainty and Perception of Year-End Work Incentives

29 Pages Posted: 14 Jul 2023

See all articles by Andreas Kostøl

Andreas Kostøl

Arizona State University (ASU) - W.P. Carey School of Business; Statistics Norway; Norges Bank; IZA Institute of Labor Economics

Andreas Steinvall Myhre

Statistics Norway

Mark Whitmeyer

Arizona State University (ASU)

Abstract

While taxes are based on year-end income, people often face uncertainty about the next month’s earnings and make multiple labor supply decisions during the year. Using a regression discontinuity approach, we analyze a mid-year informational treatment that provides information about the year-end tax-benefit schedule to Norwegian welfare recipients. Consistent with a simple model of (mis-)perceived incentives, individuals with stable earnings modify their year-end earnings target while those with variable earnings do not display any response. The findings suggest that the value of information depends on the stability of the labor environment and has important implications for the targeting efficiency of information policies.

Keywords: Labor Supply, information frictions, welfare programs, Disability Insurance

Suggested Citation

Kostøl, Andreas and Myhre, Andreas Steinvall and Whitmeyer, Mark, Within-Year Uncertainty and Perception of Year-End Work Incentives. Available at SSRN: https://ssrn.com/abstract=4509964 or http://dx.doi.org/10.2139/ssrn.4509964

Andreas Kostøl (Contact Author)

Arizona State University (ASU) - W.P. Carey School of Business ( email )

Tempe, AZ 85287-3706
United States

Statistics Norway ( email )

N-0033 Oslo
Norway

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Andreas Steinvall Myhre

Statistics Norway ( email )

N-0033 Oslo
Norway

Mark Whitmeyer

Arizona State University (ASU) ( email )

555 N Central Ave
Phoenix, AZ 85004
United States

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