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Taxation and Labor Force Participation: The Case of Italy

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  • Stefania Marcassa
  • Fabrizio Colonna

    ()
    (THEMA, Universite de Cergy-Pontoise
    Banca d'italia, Economic Structure and Labor Market Division.)

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    Abstract

    Italy has the lowest labor force participation of women among OECD countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner house- holds, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the e ects of alternative revenue-neutral tax systems. We nd that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the e ects of the former concentrated on low educated women.

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    Bibliographic Info

    Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2011-22.

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    Date of creation: 2011
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    Handle: RePEc:ema:worpap:2011-22

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    Keywords: female labor force participation; Italian tax system; second earner tax rate; joint taxa- tion; gender-based taxation; working tax credit JEL Classi cation: J21; J22; H31;

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    Cited by:
    1. Giuseppe De Luca & Claudio Rossetti & Daniela Vuri, 2013. "In-work benefits for married couples: an ex-ante evaluation of EITC and WTC policies in Italy," Working Papers 12, Department of the Treasury, Ministry of the Economy and of Finance.

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