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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 01-7:
Overtime work, dual job holding and taxation

Anders Frederiksen (), Ebbe Krogh Graversen and Nina Smith ()

Abstract: Traditionally, labour supply data do not include much information on hours and wages in secondary

job or overtime work. In this paper, we estimate labour supply models based on survey information on hours and

wages in overtime work and second job which is merged to detailed register information on income taxes,

deductions, taxable income etc. We also allow for the effect of observed fixed costs in main occupation and

unobserved fixed costs in second job, and a ‘stigmatization effect’ from unemployment. The estimated models

follow a ‘Hausman-approach’. The results indicate that the labour supply elasticities are highly sensitive to the

inclusion of information on overtime work and secondary job and to the handling of fixed costs of work. The

estimated elasticities are numerically larger when explicit information on overtime and second job work is taken

into account compared to traditional labour supply models without explicit information on overtime pay and second

job wages. However, when the model allows for stigmatization effects and unobserved fixed costs of work in second

job, the resulting elasticities reduce considerably.

Keywords: Labour supply; Dual job holding; Overtime work; Piecewise linear budget constraints; (follow links to similar papers)

JEL-Codes: C13; C21; C24; H24; J22; (follow links to similar papers)

38 pages, May 1, 2001

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