Intertemporal Labor Supply Substitution? Evidence from the Swiss Income Tax Holidays

This paper estimates intertemporal labor supply responses to two-year long income tax holidays staggered across Swiss cantons. Cantons shifted from an system based on the previous two years’ a standard annual pay as you earn system, leaving years of untaxed. We find significant but quantitatively very small wage earnings with elasticity 0.025 overall. High earners and especially self-employed display larger elasticities around 0.1 0.25, respectively, most likely driven by avoidance. no effects along extensive margin at all. (JEL H24, H26, J22, J23, J31, R23)