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Taxation, Aggregates and the Household

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Author Info
Guner, Nezih
Kaygusuz, Remzi
Ventura, Gustavo

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Abstract

We evaluate reforms to the U.S. tax system in a dynamic setup with heterogeneous married and single households, and with an operative extensive margin in labour supply. We restrict our model with observations on gender and skill premia, labour force participation of married females across skill groups, and the structure of marital sorting. We study four revenue-neutral tax reforms: a proportional consumption tax, a proportional income tax, a progressive consumption tax, and a reform in which married individuals file taxes separately. Our findings indicate that tax reforms are accompanied by large and differential effects on labour supply: while hours per-worker display small increases, total hours and female labour force participation increase substantially. Married females account for more than 50% of the changes in hours associated to reforms, and their importance increases sharply for values of the intertemporal labour supply elasticity on the low side of empirical estimates. Tax reforms in a standard version of the model result in output gains that are up to 15% lower than in our benchmark economy.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6702.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6702

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Related research
Keywords: labour force participation; taxation; two-earner households;

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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Axel Börsch-Supan & Alexander Ludwig, 2008. "Old Europe Ages: Reforms and Reform Backlashes," NBER Chapters, in: Demography and the Economy National Bureau of Economic Research, Inc. [Downloadable!]
  2. Bulent Guler & Fatih Guvenen & Giovanni L. Violante, 2009. "Joint-Search Theory: New Opportunities and New Frictions," NBER Working Papers 15011, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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