Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2016:11: The Anatomy of the Extensive Margin Labor Supply Response

Spencer Bastani (), Ylva Moberg () and Håkan Selin ()
Additional contact information
Spencer Bastani: Department of Economics and Statistics, Linnaeus University
Ylva Moberg: Department of Economics, Postal: Uppsala University, P.O. Box 513, SE-751 20 Uppsala, Sweden
Håkan Selin: Institute for Evaluation of Labour Market and Education Policy, Postal: SE-751 20 Uppsala, Sweden

Abstract: No previous quasi-experimental paper has systematically examined the relationship between the extensive margin labor supply response to taxation and the employment level. We model the labor force participation margin and estimate participation responses for married women in Sweden using population-wide administrative data and a solid identification strategy. The participation elasticity is more than twice as large in the lowest-skill sample (with relatively low employment) as compared with the highest-skill sample (with high employment). Our analysis suggests that cross- and within country comparisons of participation elasticities always should be made with reference to the relevant employment level.

Keywords: labor supply; social assistance; housing allowance; in-work tax credits; take up of transfer programs

JEL-codes: H20; J22

50 pages, August 23, 2016

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