Does Labor Supply Respond to a Flat Tax?Evidence from the Russian Tax Reform

We exploit the exogenous change in marginal tax rates created by the Russian flat tax reformof 2001 to identify the effect of taxes on labor supply of males and females. We apply theweighted difference-in-difference regression approach and instrumental variables to the laborsupply function estimated on individual panel data. The mean regression results indicate thatthe tax reform led to a statistically significant increase in male hours of work but had no effecton that of females. However, we find a positive response to tax changes at both tails of thefemale hour distribution. We also find that the reform increased the probability of finding a jobamong both males and females. Despite significant variation in individual responses, theaggregate labor supply elasticities are trivial and suggest that reform-induced changes inlabor supply were an unlikely explanation for the amplified personal income tax revenues thatfollowed the reform....