Resumen de Labour Supply Responses to Income Tax Changes in Spain

Antonio Cutanda, Juan Alberto Sanchis Llopis

• This paper simulates the response of the Spanish labour supply to income tax changes using estimates for the intertemporal elasticity of substitution of leisure, calculated using a pseudo-panel built combining information from the EPA and the ECPF, for the period 1987-1997. According to our findings, income tax reforms have an impact on Spanish labour market, although the effects are quite small, making this mechanism a restricted tool for addressing the country’s existing social security system deficit. Further, labour responses differ for men and women, across workers’ age, as well as between permanent and fixed-term contract workers.