PhD Lunch Seminars Rotterdam

Maaike Stoel
Thursday, 28 March 2013

We study the elasticity of taxable income (ETI) in the Netherlands. Specifically, we consider the responsiveness of taxable labour income of employees to changes in marginal tax rates using the large 2001 tax reform in the Netherlands. Following the recent literature we instrument the endogenous marginal tax rates with synthetic marginal tax rates using projected exogenous income. Furthermore, we consider a number of controls for exogenous income growth, including base-year income and a spline in income for pre reform income growth, next to socioeconomic controls like education, ethnicity and household type. For all workers we find an ETI of 0.082-0.086. For workers with high labour income (>50,000 euro) the ETI
rises to 0.21-0.49. We also find that the ETI is higher for women than for men.