Working Paper: NBER ID: w27726
Authors: Alisa Tazhitdinova
Abstract: Moonlighting is increasingly popular in OECD countries, with 5 to 10% of workers holding two or more jobs. However, little is known about the responsiveness of moonlighting to financial incentives due to the lack of identifying variation. This paper studies a unique reform in Germany that allowed workers to hold small secondary jobs tax-free, decreasing the marginal tax rate by between 19.5 to 66pp. I show that the reform resulted in a dramatic increase in moonlighting that was not offset by reductions in primary earnings, and that hours constraints is the key determinant of moonlighting.
Keywords: moonlighting; tax reform; labor supply; Germany
JEL Codes: H20; J01
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2003 tax reform in Germany (H29) | moonlighting rates (J33) |
| moonlighting rates (J33) | primary earnings (E25) |
| primary earnings between €400 and €1000 (J31) | likelihood of secondary jobs (J29) |
| 2003 tax reform in Germany (H29) | low-paid secondary jobs (J46) |
| tax break (H20) | moonlighting increase (J29) |
| hours constraints (C41) | moonlighting (Y60) |