Taxation and Labor Force Participation: The Case of Italy
AbstractItaly 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 households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.
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Bibliographic InfoPaper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-021.
Date of creation: Jul 2011
Date of revision:
female labor force participation; Italian tax system; marginal tax rate; joint taxation; gender-based taxation; working tax credit;
This paper has been announced in the following NEP Reports:
- NEP-ACC-2011-11-07 (Accounting & Auditing)
- NEP-ALL-2011-11-07 (All new papers)
- NEP-EUR-2011-11-07 (Microeconomic European Issues)
- NEP-LAB-2011-11-07 (Labour Economics)
- NEP-LMA-2011-11-07 (Labor Markets - Supply, Demand, & Wages)
- NEP-PBE-2011-11-07 (Public Economics)
- NEP-PUB-2011-11-07 (Public Finance)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- The excessive taxation of married couples in Italy
by Economic Logician in Economic Logic on 2011-11-17 15:55:00
- Giuseppe De Luca & Claudio Rossetti & Daniela Vuri, 2012.
"In-Work Benefits for Married Couples: An Ex-Ante Evaluation of EITC and WTC Policies in Italy,"
CEIS Research Paper
244, Tor Vergata University, CEIS, revised 23 Jul 2012.
- De Luca, Giuseppe & Rossetti, Claudio & Vuri, Daniela, 2012. "In-Work Benefits for Married Couples: An Ex-Ante Evaluation of EITC and WTC Policies in Italy," IZA Discussion Papers 6739, Institute for the Study of Labor (IZA).
- 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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