Data and Code for: Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in Iceland

Principal Investigator(s):  View help for Principal Investigator(s) Josef Sigurdsson, Stockholm University

Version:  View help for Version V1

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  data 11/19/2024 03:33:AM
  output 11/19/2024 03:33:AM
  programs 11/19/2024 03:34:AM
  raw_data 11/19/2024 03:33:AM
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Project Description

Summary:  View help for Summary This folder contains code and data for the paper "Labor Supply Responses and Adjustment Frictions: A Tax-Free Year in Iceland".

Abstract: Labor income earned in Iceland in 1987 went untaxed. I use this episode to study labor supply responses to temporary wage changes. Using a population-wide dataset of earnings and working time and two identification strategies, I estimate intensive and extensive margin Frisch elasticities of 0.4 and 0.09, respectively. Workers with the ability to adjust drive these average responses: extensive margin by young and close-to-retirement cohorts and intensive margin responses by workers in temporally flexible jobs, though secondary jobs contribute to one-tenth of the response. The results suggest that adjustment frictions may similarly explain differences in elasticities within and across countries.

Scope of Project

Subject Terms:  View help for Subject Terms Economics
JEL Classification:  View help for JEL Classification
      E65 Studies of Particular Policy Episodes
      H24 Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
      H31 Fiscal Policies and Behavior of Economic Agents: Household
      J21 Labor Force and Employment, Size, and Structure
      J22 Time Allocation and Labor Supply
Geographic Coverage:  View help for Geographic Coverage Iceland
Universe:  View help for Universe Icelandic population at working age
Data Type(s):  View help for Data Type(s) program source code

Methodology

Data Source:  View help for Data Source Administrative data
Unit(s) of Observation:  View help for Unit(s) of Observation Individual
Geographic Unit:  View help for Geographic Unit Iceland

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Published Versions

V1 [2025-10-03]

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