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Income Effects and Labor Supply - Evidence from a Swedish Property Tax Reform

Haggren, Ida LU and Henriksson, Lucas LU (2024) NEKP01 20241
Department of Economics
Abstract
This paper utilizes the 2008 capping of the Swedish property tax, which decreased the tax at different rates below and above the cap, to estimate the income effect. Using administrative data on over 600,000 individuals over twelve years, we employ a Difference-in-Differences approach and Coarsened Exact Matching to study how married cohabiting couples around the cap threshold respond to the reform. Our key finding is that the reform had a negative effect on the labor supply of individuals aged 55 and above, primarily driven by early retirement along the extensive margin where men respond more strongly than women. For individuals below age 55, we find no short-term labor supply response. The results have implications for policy design, in... (More)
This paper utilizes the 2008 capping of the Swedish property tax, which decreased the tax at different rates below and above the cap, to estimate the income effect. Using administrative data on over 600,000 individuals over twelve years, we employ a Difference-in-Differences approach and Coarsened Exact Matching to study how married cohabiting couples around the cap threshold respond to the reform. Our key finding is that the reform had a negative effect on the labor supply of individuals aged 55 and above, primarily driven by early retirement along the extensive margin where men respond more strongly than women. For individuals below age 55, we find no short-term labor supply response. The results have implications for policy design, in particular optimal tax policies around retirement ages. (Less)
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author
Haggren, Ida LU and Henriksson, Lucas LU
supervisor
organization
course
NEKP01 20241
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Income Effect, Labor Supply, Retirement, Property Tax, Difference-in-Difference
language
English
id
9167236
date added to LUP
2024-10-01 13:18:16
date last changed
2024-10-01 13:18:16
@misc{9167236,
  abstract     = {{This paper utilizes the 2008 capping of the Swedish property tax, which decreased the tax at different rates below and above the cap, to estimate the income effect. Using administrative data on over 600,000 individuals over twelve years, we employ a Difference-in-Differences approach and Coarsened Exact Matching to study how married cohabiting couples around the cap threshold respond to the reform. Our key finding is that the reform had a negative effect on the labor supply of individuals aged 55 and above, primarily driven by early retirement along the extensive margin where men respond more strongly than women. For individuals below age 55, we find no short-term labor supply response. The results have implications for policy design, in particular optimal tax policies around retirement ages.}},
  author       = {{Haggren, Ida and Henriksson, Lucas}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Income Effects and Labor Supply - Evidence from a Swedish Property Tax Reform}},
  year         = {{2024}},
}