Estimating the effects of personal income tax on labour supply in Italy

In this paper we attempt to estimate labour supply elasticities for four categories of Italian workers: married men, married women, unmarried men, unmarried women. We use microdata provided by the Bank of Italy 2002 survey adopting a piecewise linear labour supply functional form. Sample selection and tobit technique have been used. Wage elasticities are calculated from the results of the labour supply estimation. Hours of work are found to be positively related to after tax labour income and negatively related to virtual income. Female labour supply is more sensitive than that of males to an increase in net wage.