Do increases in tax allowances and/or reductions in the rate of income
tax stimulate people into working more?

< Tax cuts result in greater participation in the labour force. An
increase in net earnings gives people a greater incentive to work
longer and earn more. Tax cuts also lead to greater self-employment
with entrepreneurs setting up new businesses. American economist
Richard Vedder studied economic growth in twenty states between 1979
and 1989. He found that the economic growth of the states with the
lowest taxes was 20% greater than those with the highest taxes.
http://www.taxpayer.com/studies/sask/Section-3.htm

University of Texas labour economist Daniel Hammermesh projects that a
10% cut in payroll taxes would lead to a 3% increase in employment in
the short term and a 10% increase in the long term.
http://www.getamericaworking.org/press/USAToday_Payroll_Jan8.pdf

The effect of tax cuts depends on whether they are perceived to be
permanent or temporary tax cuts. Permanent tax cuts lead to the
stimulation of the economy through greater consumer spending which
creates demand for products and services. This in turn creates jobs as
employers need to expand their operations in response to greater
demand. http://www.policy.ca/PDF/20010409.pdf
http://www.revisionguru.co.uk/economics/unemp4.htm
http://www.cbpp.org/11-27-01tax.htm

Tax cuts only stimulate employment if the ratio of net wages to
unemployment benefits is increased – people are only encouraged to
work if they can earn more in employment than if they remain on
benefit. http://www.imf.org/external/pubs/ft/issues/issues20/>


<Additional links:>

Cutting taxes gives people a greater incentive to work.
http://usconservatives.about.com/blc1228taxcut.htm

The impact of employment tax cuts on unemployment and wages.
http://ideas.repec.org/p/cep/cepdps/0361.html

<Search strategy:>

<"tax cuts" " increase employment">
<://www.google.com/search?hl=en&lr=&ie=ISO-8859-1&q=%22tax+cuts%22+%22+increase+employment%22>

<"tax cuts"  "greater incentive to work">
<://www.google.com/search?q=%22tax+cuts%22++%22greater+incentive+to+work%22&hl=en&lr=&ie=UTF-8&start=10&sa=N>


<Hope this helps.>

On reflection, one must conclude that in general those actions must
either stimulate people into working more or to be more honest about
the taxable income they've earned. After all, if taxes go to 100%,
either you don't work at all (why bother?) or you lie about it. What
no one knows is the exact shape of the curve as taxes change from 0%
to 100%. (From the perspective of the taxing authority, this is the
"Laffer curve".)

Google search: "Laffer curve"