Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 313: Taxes, benefits and labour force participation: A survey of the quasi-experimental literature

Jacob Lundberg () and John Norell
Additional contact information
Jacob Lundberg: Timbro, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
John Norell: Timbro, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: We review the literature that uses quasi-experimental methods to estimate the elasticity of labour force participation with respect to the financial gain from work. We find a wide range of elasticities, with an average of 0.38. 26 out of 31 papers find elasticities larger than 0.1, providing strong evidence that individuals respond to incentives on the extensive margin of labour supply. Elasticities are larger for women and older workers, and have declined over time.

Keywords: participation elasticity; quasi-experimental methods; labour supply; extensive margin

JEL-codes: H24; J22

26 pages, October 19, 2018

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