Who Reacts to Income Tax Rate Changes? The Relationship Between Income Taxes and the Motivation to Work: The Case of Azerbaijan

Nadirov, O., Dehning, B., Aliyev, K., & Minura, I. (2017). Who reacts to income tax rate changes? The relationship between income taxes and the motivation to work: the case of Azerbaijan. Scientific papers of the University of Pardubice. Series D, Faculty of Economics and Administration. 40/2017.

14 Pages Posted: 31 Jul 2020

See all articles by Orkhan Nadirov

Orkhan Nadirov

affiliation not provided to SSRN

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Khatai Aliyev

Azerbaijan State University of Economics (UNEC); Baku Engineering University

Date Written: 2017

Abstract

This research investigates the effects of income taxation on the motivation to work by employing a survey method for the Azerbaijan population. The two research questions of interest are, if subjects consider income taxes when deciding how many hours to work and how subjects would react to a hypothetical 5% income tax rate increase. Also examined are the responses to these questions between subjects with different socio-economic characteristics. Examining cross-sectional data of 326 respondents reveals that income taxes do not influence Azerbaijan labor market participants’ motivation to work, regardless of their socio-economic characteristics. Empirical results indicate that reactions to hypothetical income tax rate increases show that the strength of response differs significantly across gender, age, marital status, field of employment, and income level. However, there are no significant results for differences in gender and after-tax wages. Our study contributes to the labor supply literature with the theory that after an income tax is imposed, both the average price and the average utility of leisure is greater for high wage earners than low wage earners.

Keywords: Income Taxes; Motivation to Work; Survey Design; OLS Method; Azerbaijan

JEL Classification: H24; J22

Suggested Citation

Nadirov, Orkhan and Dehning, Bruce and Aliyev, Khatai, Who Reacts to Income Tax Rate Changes? The Relationship Between Income Taxes and the Motivation to Work: The Case of Azerbaijan (2017). Nadirov, O., Dehning, B., Aliyev, K., & Minura, I. (2017). Who reacts to income tax rate changes? The relationship between income taxes and the motivation to work: the case of Azerbaijan. Scientific papers of the University of Pardubice. Series D, Faculty of Economics and Administration. 40/2017., Available at SSRN: https://ssrn.com/abstract=3643542

Orkhan Nadirov

affiliation not provided to SSRN

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Khatai Aliyev (Contact Author)

Azerbaijan State University of Economics (UNEC) ( email )

Istiglaliyyat street 6
Baku, AZ Az1001
Azerbaijan

Baku Engineering University ( email )

Hasan Aliyev str. 120
Khirdalan, Baku AZ 0101
Azerbaijan

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