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Assessing the Impact of Tax and Transfer Policies on Labour Supply: A Survey

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  • Bernard Fortin
  • Guy Lacroix

Abstract

Changes in parameters of tax and transfer programs can induce individuals to alter their behaviour in a wide variety of ways, including changes in labour supply, in the nature of employee compensation, in the choice of working in the underground economy, in savings decisions, in human capital investments and in fertility decisions. The magnitude of these responses is of critical importance in the formulation of adequate tax and transfer policies. Thus the behavioural effects of income taxes and those implicit in means-tested transfer programs may strongly influence the impact of these policies on income, tax receipts, budgetary costs and welfare. In this paper, we abide with the tradition of evaluating the impact of tax and transfer programs on labour supply at both the extensive (the decision to work or not) and the intensive margins (the number of hours worked). We provide both a theoretical and empirical survey of the labour supply impact of tax and transfer programs. An important part of the empirical results discussed in this paper focuses on the labour supply impact of tax and transfer reforms that occurred in the US, in the UK and in Canada.

Suggested Citation

  • Bernard Fortin & Guy Lacroix, 2002. "Assessing the Impact of Tax and Transfer Policies on Labour Supply: A Survey," CIRANO Project Reports 2002rp-10, CIRANO.
    • Handle: RePEc:cir:cirpro:2002rp-10
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    File URL: https://cirano.qc.ca/files/publications/2002RP-10.pdf
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    Cited by:

    1. Louis Lévy-Garboua & David Masclet & Claude Montmarquette, 2005. "A micro-foundation for the Laffer curve in a real effort experiment," Post-Print halshs-00196410, HAL.
    2. Sophie Buffeteau & Damien Echevin, 2008. "Taxation and marriage: Evidence from a natural experiment in France," Cahiers de recherche 08-01, Departement d'économique de l'École de gestion à l'Université de Sherbrooke.
    3. Andrea Leiter & Engelbert Theurl, 2004. "Soziale Krankenversicherung und Einkommensteuer: Empirische Tarifanalyse einer komplexen Beziehung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 30(3), pages 363-391.
    4. Sophie Buffeteau & Damien Echevin, 2003. "Taxation, Marriage and Labor Supply: Evidence from a Natural Experiment in France," Cahiers de recherche 0340, CIRPEE.
    5. Alexandre Laurin, 2018. "Two-Parent Families with Children: How Effective Tax Rates Affect Work Decisions," e-briefs 270, C.D. Howe Institute.
    6. Sandra Dandie & Joseph Mercante, 2007. "Australian labour supply elasticities: Comparison and critical review," Treasury Working Papers 2007-04, The Treasury, Australian Government, revised Oct 2007.

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