Details
| Original language | English |
|---|---|
| Pages (from-to) | 476-484 |
| Number of pages | 9 |
| Journal | Scandinavian Journal of Economics |
| Volume | 115 |
| Issue number | 2 |
| Publication status | Published - Apr 2013 |
Abstract
In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25, and 50 percent. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is because of a net wage illusion effect. The existence of this effect demonstrates that not only are the tax rate and the tax base of importance for work incentives, but the perception of a tax is also important.
Keywords
- Behavioral economics, C91, Experimental economics, H2, Income taxation, Tax perception
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)
- Economics and Econometrics
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In: Scandinavian Journal of Economics, Vol. 115, No. 2, 04.2013, p. 476-484.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Net Wage Illusion in a Real-Effort Experiment
AU - Fochmann, Martin
AU - Weimann, Joachim
AU - Blaufus, Kay
AU - Hundsdoerfer, Jochen
AU - Kiesewetter, Dirk
PY - 2013/4
Y1 - 2013/4
N2 - In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25, and 50 percent. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is because of a net wage illusion effect. The existence of this effect demonstrates that not only are the tax rate and the tax base of importance for work incentives, but the perception of a tax is also important.
AB - In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25, and 50 percent. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is because of a net wage illusion effect. The existence of this effect demonstrates that not only are the tax rate and the tax base of importance for work incentives, but the perception of a tax is also important.
KW - Behavioral economics
KW - C91
KW - Experimental economics
KW - H2
KW - Income taxation
KW - Tax perception
UR - http://www.scopus.com/inward/record.url?scp=84876092175&partnerID=8YFLogxK
U2 - 10.1111/sjoe.12007
DO - 10.1111/sjoe.12007
M3 - Article
AN - SCOPUS:84876092175
VL - 115
SP - 476
EP - 484
JO - Scandinavian Journal of Economics
JF - Scandinavian Journal of Economics
SN - 0347-0520
IS - 2
ER -