Does Labor Supply Respond To A Flat Tax? Evidence From The Russian Tax Reform

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Executive Summary

The authors exploit the exogenous change in marginal tax rates created by the Russian flat tax reform of 2001 to identify the effect of taxes on labor supply of males and females. They apply the weighted difference-in-difference regression approach and instrumental variables to the labor supply function estimated on individual panel data. The mean regression results indicate that the tax reform led to a statistically significant increase in male hours of work but had no effect on that of females. However, they find a positive response to tax changes at both tails of the female hour distribution.

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