Framed Payslips and People's Reactions to Labor Tax Changes

Ghesla, Claus and Sonntag, Axel (2019): Framed Payslips and People's Reactions to Labor Tax Changes.

Abstract

Payslips are supposed to notify employees about wage-related information, enabling them to adjust their labor supply, when appropriate. However, payslips are often information-laden and complex to understand, casting doubt on whether they are adequately up to the task, potentially resulting in inefficient labor supply reactions. In a real-effort laboratory experiment we use a variety of information frames to potentially support a better understanding of wage related information. We find that participants strongly react to changes of incidental wage costs, yet the framing of payslips has no additional effect on people's labor supply. Nevertheless, including simple graphics increases comprehension and readability.

• Item Type: MPRA Paper
• Language: English
• Keywords: framing; labor taxes; incidental wage costs; experiment
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H29 - Other; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply

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