Taxes, benefits and labour force participation: A survey of the quasi-experimental literature

Abstract

We review the literature that uses quasi-experimental methods to estimate the elasticity of labour force participation with respect to the financial gain from work. We find a wide range of elasticities, with an average of 0.36. 27 out of 35 papers find elasticities larger than 0.1, providing strong evidence that individuals respond to incentives on the extensive margin of labour supply. Elasticities are larger for women, and have declined over time.