This paper shows the results of an experiment aiming to test the effect of taxation on the labour supply. Differently from previous experiments [Levy-Garboua, L., Masclet, D., & Montmarquette, C. (2005). Fiscalilet offre de travail: Une etude experimentale. CIRANO, Montreal, working paper 2005, s-23; Sillamaa, M.A., (1999). Taxpayer behavior in response to taxation: Comment and new experimental evidence. Journal of Accounting and Public Policy, 18; Sutter, M., & Weck-Hannemann, H. (2003). Taxation and the veil of ignorance - A real effort experiment of the Laffer curve. Public Choice, 115; Swenson, C.W., (1988). Taxpayer behavior in response to taxation. An experimental analysis. Journal of Accounting and Public Policy, 7], in our experiment the revenue of taxation is not left unaccounted for but employed - more realistically - to finance public goods and insurance against risk (i.e., a Welfare State). The result is a slight increase in the labour supply. This behaviour is the opposite of what was shown in the experiments quoted above, but is consistent with a theoretical model suggested by Bird in 2001 [Bird, E.J., (2001). Does the welfare state induce risk-taking? Journal of Public Economics, 80]. The use of the tax revenue appears to be relevant for subjects' reaction to tax levies. (C) 2007 Published by Elsevier B.V.
