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Behavioural responses to income taxation in Norway

Author

Listed:
  • Graber, Michael

    (SSB)

  • Mogstad, Magne

    (University of Chicago)

  • Torsvik, Gaute

    (Dept. of Economics, University of Oslo)

  • Vestad, Ola

    (SSB)

Abstract

In this report, we combine theory and empirical estimates for how labor earnings respond to changes in tax rates and non-earned income. We use lottery winnings to obtain variation in non-earned income and tax reforms to obtain variation in the net of tax rate. Combining this information with measures of extensive margin responses and the progressivity of the Norwegian income tax schedule, we are able to point identify uncompensated and compensated behavioral responses to income taxes and therefore to calculate efficiency losses and optimal income tax rates (for given welfare weights).

Suggested Citation

  • Graber, Michael & Mogstad, Magne & Torsvik, Gaute & Vestad, Ola, 2022. "Behavioural responses to income taxation in Norway," Memorandum 4/2022, Oslo University, Department of Economics.
    • Handle: RePEc:hhs:osloec:2022_004
    as

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    File URL: https://www.sv.uio.no/econ/english/research/Memoranda/working-papers/pdf-files/2022/memo-04-2022.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    income effect; labor supply elasticities; lottery winnings; efficiency loss; optimal income taxation;
    All these keywords.

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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