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The elasticity of taxable income in the Netherlands

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  • Egbert Jongen
  • Maaike Stoel

Abstract

We study the elasticity of taxable labour income in the Netherlands. We use a large and rich data set, including both financial and demographic variables,for the period 1999-2005. The 2001 tax reform generates large exogenous variation in marginal tax rates at diff erent segments of the income distribu- tion. For all workers, we find an elasticity of 0.10 in the short run, 1 year after the reform, rising to 0.24 in the medium to longer run, 5 years after the reform. Furthermore, we find that the elasticity is higher for higher incomes and women. Also, we find that the elasticity of taxable labour income is higher than the elasticity of annual hours worked.

Suggested Citation

  • Egbert Jongen & Maaike Stoel, 2016. "The elasticity of taxable income in the Netherlands," CPB Discussion Paper 337, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:discus:337
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    References listed on IDEAS

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    Cited by:

    1. Mr. Alexander D Klemm & Ms. Li Liu & Mr. Victor Mylonas & Mr. Philippe Wingender, 2018. "Are Elasticities of Taxable Income Rising?," IMF Working Papers 2018/132, International Monetary Fund.
    2. Nicole Bosch & Egbert Jongen & Wouter Leenders & Jan Möhlmann, 2019. "Non-bunching at kinks and notches in cash transfers in the Netherlands," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(6), pages 1329-1352, December.
    3. Nicole Bosch & Henk-Wim de Boer, 2017. "The Elasticity of Taxable Income for the Self-Employed: Heterogeneity across Reforms and Income Levels," CPB Discussion Paper 354.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Nicole Bosch & Henk-Wim de Boer, 2017. "The Elasticity of Taxable Income for the Self-Employed: Heterogeneity across Reforms and Income Levels," CPB Discussion Paper 354, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Nicole Bosch & Egbert Jongen & Wouter Leenders & Jan Möhlmann, 2019. "Non-Bunching at Kinks and Notches in Cash Transfers," CPB Discussion Paper 401.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    6. Jacobs, Bas & Jongen, Egbert L.W. & Zoutman, Floris T., 2017. "Revealed social preferences of Dutch political parties," Journal of Public Economics, Elsevier, vol. 156(C), pages 81-100.
    7. Nicole Bosch & Egbert Jongen & Wouter Leenders & Jan Möhlmann, 2019. "Non-Bunching at Kinks and Notches in Cash Transfers," CPB Discussion Paper 401, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Sophia Igdalov & Roni Frish & Noam Zussman, 2017. "The Wage Response to a Reduction in Income Tax Rates: The 2003–2009 Tax Reform in Israel," Bank of Israel Working Papers 2017.14, Bank of Israel.

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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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