Scandinavian Working Papers in Economics

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

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

Anders Frederiksen (), Ebbe Krogh Graversen and Nina Smith ()
Additional contact information
Anders Frederiksen: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Ebbe Krogh Graversen: The Danish Institute for Studies in Research and Research Policy (Analyseinstitut for Forskning), Postal: Finlandsgade 4, 8200 Aarhus N, Denmark
Nina Smith: Department of Economics, Aarhus School of Business, Postal: Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

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

JEL-codes: C13; C21; C24; H24; J22

38 pages, May 1, 2001

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