Frederiksen, Anders6; Graversen, Ebbe Krogh4; Smith, Nina7
1 Department of Economics, Aarhus School of Business, Aarhus BSS, Aarhus University2 Centre for Research in Integration, Education, Qualifications and Marginalization (CIM), Aarhus School of Business, Aarhus BSS, Aarhus University3 Department of Business Development and Technology, Aarhus BSS, Aarhus University4 unknown5 Department of Economics and Business Economics, Aarhus BSS, Aarhus University6 Department of Business Development and Technology, Aarhus BSS, Aarhus University7 Department of Economics and Business Economics, Aarhus BSS, Aarhus University
Labor supply data seldom include detailed information on hours and wages in secondary job or overtime work. Based on survey information on hours and wages in overtime work and second job which is merged to administrative register information on income taxes and deductions we estimate a ‘‘Hausman labor supply model,’’ which allows for a detailed treatment of nonconvexities. Including explicit information on overtime pay and second job wages increase the estimated elasticities compared to a standard labor supply model without this information. However, allowing a more flexible treatment of nonconvexities the estimated elasticities are reduced; even below the estimates of the baseline results. In simulations we show that these findings have significant consequences when evaluating the degree of self-financing of various tax reforms.
Research in Labor Economics, 2008, Vol 28, p. 25-55