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Family Labour Supply and Taxes in Ireland

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  • Tim Callan

    (Economic and Social Research Institute (ESRI))

  • Arthur Van Soest

    (Tilburg University, The Netherlands)

Abstract

We analyse the labour supply of husband and wife in Irish families. A static structural model used. Account is taken of nonlinearities and non-convexities in tax-benefit system, of fixed costs of working, of unobserved preference variation across families, of prediction errors in wages of non-workers and of potential endogeneity of gross wage rates. Moreover the neoclassical model is extended such that information on involuntary unemployment is incorporated in a structural way. Smooth simulated maximum likelihood is used to estimate the model, using household data from 1997. The Irish tax system is characterized by ?income splitting? so that the tax liability of the couple depends essentially on the joint income of husband and wife. We analyse the sensitivity of husbands? and wives? labour supply with respect to the own wage, the partner's wage, and other income. We compare labour supply under the actual tax regime and under alternatives involving more independent taxation, and analyse the extent to which the tax system can explain the low participation of married women in Ireland.

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File URL: http://www.esri.ie/UserFiles/publications/20071011132239/WP078.pdf
File Function: First version, 1996
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Bibliographic Info

Paper provided by Economic and Social Research Institute (ESRI) in its series Papers with number WP078.

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Length: 25 pages
Date of creation: Oct 1996
Date of revision:
Handle: RePEc:esr:wpaper:wp078

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References

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  1. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  2. Kapteyn, Arie & Kooreman, Peter & van Soest, Arthur, 1990. "Quantity Rationing and Concavity in a Flexible Household Labor Supply Model," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 55-62, February.
  3. William T. Dickens & Shelly J. Lundberg, 1985. "Hours Restrictions and Labor Supply," NBER Working Papers 1638, National Bureau of Economic Research, Inc.
  4. Hausman, Jerry & Ruud, Paul, 1984. "Family Labor Supply with Taxes," American Economic Review, American Economic Association, vol. 74(2), pages 242-48, May.
  5. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
  6. Callan, T. & VAN Soest, A., 1993. "Female Labour Supply in Farm Households: Farm and Off-Farm Participation," Papers 9310, Tilburg - Center for Economic Research.
  7. Tim Callan, 1991. "Male-Female Wage Differentials in Ireland," Papers WP028, Economic and Social Research Institute (ESRI).
  8. Ransom, Michael R, 1987. "An Empirical Model of Discrete and Continuous Choice in Family Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 465-72, August.
  9. Blundell, Richard & Walker, Ian, 1986. "A Life-Cycle Consistent Empirical Model of Family Labour Supply Using Cross-Section Data," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 539-58, August.
  10. Soest, Arthur van & Kapteyn, Arie & Kooreman, Peter, 1993. "Coherency and regularity of demand systems with equality and inequality constraints," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 161-188.
  11. Killingsworth, Mark R. & Heckman, James J., 1987. "Female labor supply: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 2, pages 103-204 Elsevier.
  12. Blomquist, N. Soren, 1988. "Nonlinear taxes and labor supply," European Economic Review, Elsevier, vol. 32(6), pages 1213-1226, July.
  13. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
  14. Stern, Steven, 1992. "A Method for Smoothing Simulated Moments of Discrete Probabilities in Multinomial Probit Models," Econometrica, Econometric Society, vol. 60(4), pages 943-52, July.
  15. Blundell, Richard & Ham, John & Meghir, Costas, 1987. "Unemployment and Female Labour Supply," Economic Journal, Royal Economic Society, vol. 97(388a), pages 44-64, Supplemen.
  16. Hausman, Jerry A, 1985. "The Econometrics of Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 53(6), pages 1255-82, November.
  17. repec:fth:stanho:e-90-11 is not listed on IDEAS
  18. Callan, Tim & Nolan, Brian & Whelan, Brendan J. & Hannan, Damian F. & Creighton, S., 1989. "Poverty, Income and Welfare in Ireland," Research Series, Economic and Social Research Institute (ESRI), number GRS146.
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