Labour Supply and Taxes: New Estimates of the Responses of Wives to Husbands' Wages
AbstractIn this paper, we estimate income- and substitution- labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996-2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and non-labour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6392.
Length: 31 pages
Date of creation: Feb 2012
Date of revision:
Publication status: published in: Applied Economics, 2013, 45 (31), 4355-4368
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Benoit Dostie, 2012. "Labour Supply and Taxes: New Estimates of the Responses of Wives to Husbandsâ€™ Wages," Cahiers de recherche 12-02, HEC MontrÃ©al, Institut d'Ã©conomie appliquÃ©e.
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
- NEP-LAB-2012-03-21 (Labour Economics)
- NEP-LMA-2012-03-21 (Labor Markets - Supply, Demand, & Wages)
- NEP-PUB-2012-03-21 (Public Finance)
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.:
- Richard P. Chaykowski & Lisa M. Powell, 1999. "Women and the Labour Market: Recent Trends and Policy Issues," Canadian Public Policy, University of Toronto Press, vol. 25(s1), pages 2-25, November.
- Joshua Angrist, 1988.
"Grouped Data Estimation and Testing in Simple Labor Supply Models,"
614, Princeton University, Department of Economics, Industrial Relations Section..
- Angrist, Joshua D., 1991. "Grouped-data estimation and testing in simple labor-supply models," Journal of Econometrics, Elsevier, Elsevier, vol. 47(2-3), pages 243-266, February.
- Devereux, Paul J., 2007.
"Improved Errors-in-Variables Estimators for Grouped Data,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
6167, C.E.P.R. Discussion Papers.
- Devereux, Paul J., 2007. "Improved Errors-in-Variables Estimators for Grouped Data," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 25, pages 278-287, July.
- Paul J Devereux, 2006. "Improved Errors-in-Variables Estimators for Grouped Data," Working Papers, School Of Economics, University College Dublin 200602, School Of Economics, University College Dublin.
- Bradley T. Heim, 2007. "The Incredible Shrinking Elasticities: Married Female Labor Supply, 1978â€“2002," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
- Eduardo Pontual Ribeiro, 2001. "Asymmetric labor supply," Empirical Economics, Springer, Springer, vol. 26(1), pages 183-197.
- Nakamura, Masao & Nakamura, Alice & Cullen, Dallas, 1979. "Job Opportunities, the Offered Wage, and the Labor Supply of Married Women," American Economic Review, American Economic Association, American Economic Association, vol. 69(5), pages 787-805, December.
- Paul J. Devereux, 2007.
"Small-sample bias in synthetic cohort models of labor supply,"
Journal of Applied Econometrics, John Wiley & Sons, Ltd.,
John Wiley & Sons, Ltd., vol. 22(4), pages 839-848.
- Paul J Devereux, 2006. "Small Sample Bias in Synthetic Cohort Models of Labor Supply," Working Papers, School Of Economics, University College Dublin 200606, School Of Economics, University College Dublin.
- J. Barry Smith & Morton Stelcner, 1988. "Labour Supply of Married Women in Canada, 1980," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 857-70, November.
- Phipps, S., 1988.
"Behavioural Response To Ui Reform In Constrained And Unconstrained Models Of Labour Supply,"
Department of Economics at Dalhousie University working papers archive, Dalhousie, Department of Economics
88-01, Dalhousie, Department of Economics.
- Shelley A. Phipps, 1991. "Behavioural Response to UI Reform in Constrained and Unconstrained Models of Labour Supply," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 34-54, February.
- Nakamura, Alice & Nakamura, Masao, 1981. "A Comparison of the Labor Force Behavior of Married Women in the United States and Canada, with Special Attention to the Impact of Income Taxes," Econometrica, Econometric Society, Econometric Society, vol. 49(2), pages 451-89, March.
- Alice Nakamura & Masao Nakamura, 1983. "Part-Time and Full-Time Work Behaviour of Married Women: A Model with a Doubly Truncated Dependent Variable," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 229-57, May.
- Nakamura, Alice & Nakamura, Masao, 1985. "Dynamic models of the labor force behavior of married women which can be estimated using limited amounts of past information," Journal of Econometrics, Elsevier, Elsevier, vol. 27(3), pages 273-298, March.
- Chris Robinson & Nigel Tomes, 1985. "More on the Labour Supply of Canadian Women," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 156-63, February.
- Charles Michalopoulos & Philip K. Robins, 2000. "Employment and child-care choices in Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 435-470, May.
- Osberg, Lars & Phipps, Shelley, 1993. "Labour Supply with Quantity Constraints: Estimates from a Large Sample of Canadian Workers," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 269-91, April.
- Paul J. Devereux, 2004. "Changes in Relative Wages and Family Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
- Pierre Lefebvre & Philip Merrigan, 2008. "Child-Care Policy and the Labor Supply of Mothers with Young Children: A Natural Experiment from Canada," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 26(3), pages 519-548, 07.
- Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 831-849, June.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.