Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/195014 
Year of Publication: 
2016
Citation: 
[Journal:] IZA Journal of European Labor Studies [ISSN:] 2193-9012 [Volume:] 5 [Issue:] 19 [Publisher:] Springer [Place:] Heidelberg [Year:] 2016 [Pages:] 1-26
Publisher: 
Springer, Heidelberg
Abstract: 
This paper provides a microeconometric analysis of labour force participation elasticities in Slovakia where we study the elasticity with respect to a unique tax reform whereby the flat tax was backtracked and replaced by a progressive tax. By estimating a probability model for labour force participation, we show that the low-skilled and females are groups that are particularly responsive to changes in income taxes and transfers. We perform a microsimulation analysis of two scenarios of flat-tax regime abolishment. We find that the recent departure from the flat-tax system in Slovakia in 2013, which introduced two tax brackets in personal income taxation, only negligibly reduced the average probability of being economically active at the extensive margin. A more significant average effect has been found in a hypothetical scenario with a similar fiscal revenue impact, simulating a departure from the flat-tax system by reintroducing five tax brackets. We show the different impacts of the two distinct scenarios of abolishing the flat tax on selected subgroups of the population.
Subjects: 
Labour force participation elasticity
Extensive margin
Microsimulation
Flat tax
JEL: 
H31
H53
I38
J21
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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