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Taxes and Female Labor Supply

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Author Info

  • Remzi Kaygusuz

    (Sabanci University)

Abstract

The Economic Recovery Act of 1981 and the Tax Reform Act of 1986 changed the U.S. income tax structure in a dramatic fashion. In particular, these two reforms reduced the marginal tax rates for married households. In this paper I investigate what part of the rise in labor force participation of married women between 1980 to 1990 (a rise of 13 percentage points) can be accounted by the changes in taxes. I build an heterogeneous agent model populated by married households. Households differ by age and educational attainment levels of their members and decide whether the second earner, the wife, should participate in the labor market. I select parameter values so that the model economy is consistent with the 1980 U.S. economy in terms of income tax structure, wages (skill premium and gender gap), marital sorting (who is married with whom), and female labor force participation. Using counterfactual experiments I find that 20-24% of the rise in married female labor force participation is accounted for by the changes in the income tax structure. Changes in wages account for 62-64%, and changes in marital sorting account for 14-16% of the rise in the participation rate of married women. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2009.11.004
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 13 (2010)
Issue (Month): 4 (October)
Pages: 725-741

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Handle: RePEc:red:issued:07-1

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Related research

Keywords: Female labor force participation; Two-person households; Taxes; Tax reforms;

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References

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  1. Larry E. Jones & Rodolfo E. Manuelli & Ellen R. McGrattan, 2003. "Why are married women working so much?," Staff Report 317, Federal Reserve Bank of Minneapolis.
  2. Javier Díaz-Giménez & Josep Pijoan-Mas, 2006. "Flat Tax Reforms In The U.S.: A Boon For The Income Poor," Working Papers wp2006_0611, CEMFI.
  3. Conny Olovsson, 2009. "Why Do Europeans Work So Little?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 39-61, 02.
  4. Jeremy Greenwood & Nezih Guner, 2004. "Marriage and Divorce since World War II: Analyzing the Role of Technological Progress on the Formation of Households," NBER Working Papers 10772, National Bureau of Economic Research, Inc.
  5. Jeremy Greenwood & Ananth Seshadri & Mehmet Yorukoglu, 2002. "Engines of Liberation," Economie d'Avant Garde Research Reports 2, Economie d'Avant Garde.
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Citations

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Cited by:
  1. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2013. "Childcare Subsidies and Household Labor Supply," Working Papers 738, Barcelona Graduate School of Economics.
  2. Guner, Nezih & Kaygusuz, Remzi & Ventura, Gustavo, 2008. "Taxation, Aggregates and the Household," IZA Discussion Papers 3318, Institute for the Study of Labor (IZA).
  3. Guner, Nezih & Kaygusuz, Remzi & Ventura, Gustavo, 2014. "Childcare Subsidies and Household Labor Supply," IZA Discussion Papers 8303, Institute for the Study of Labor (IZA).
  4. Remzi Kaygusuz, 2007. "Social Security and Two-Earner Households," 2007 Meeting Papers 677, Society for Economic Dynamics.
  5. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2013. "Income Taxation of U.S. Households: Facts and Parametric Estimates," Working Papers 705, Barcelona Graduate School of Economics.
  6. Carlos Zarazaga & Finn Kydland, 2012. "Fiscal Sentiment and the Weak Recovery from the Great Recession: A Quantitative Exploration," 2012 Meeting Papers 1139, Society for Economic Dynamics.
  7. Braun, R. Anton & Kopecky, Karen A. & Koreshkova, Tatyana, 2013. "Old, sick, alone, and poor: a welfare analysis of old-age social insurance programs," Working Paper 2013-02, Federal Reserve Bank of Atlanta.
  8. Nezih Guner & Ezgi Kaya & Virginia Sánchez-Marcos, 2014. "Gender gaps in Spain: policies and outcomes over the last three decades," SERIEs, Spanish Economic Association, vol. 5(1), pages 61-103, March.
  9. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2014. "Online appendix to "Income Taxation of U.S. Households: Facts and Parametric Estimates"," Technical Appendices 11-141, Review of Economic Dynamics.
  10. Gonzalo Castex, 2010. "Accounting for Changes in College Attendance Profile: a Quantitative Life-Cycle Analysis," Working Papers Central Bank of Chile 598, Central Bank of Chile.
  11. Marina Mendes, 2013. "Taxes, education,marriage and labor supply," Working Papers 1303, Centro de Investigacion Economica, ITAM.
  12. Seonyoung Park, 2014. "Recent Stagnation of Married Women’s Labor Supply: A Life-Cycle Structural Model," Working Papers 14-10, University of Delaware, Department of Economics.

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