Taxation, Marriage and Labor Supply: Evidence from a Natural Experiment in France
AbstractThis paper uses the French family quotient ("quotient familal") reform of 1995 to analyse the impact of the individual income tax on marriage behavior and labor supply decisions. An important feature of this reform was the cancellation of fiscal subsidies aimed at cohabitant couples with children. Before 1995, the system of the family quotient granted one extra half unit to each single parent with children as defined for tax purposes. The 1995 family quotient reform cancels the benefit for cohabitants with children by introducing the notion of isolated parents with children in the tax declaration. This measure thus compensates the marriage penalty for couples with children but does not change anything for couples without children. As a result, the tax for a one-earner cohabitant couple with one child that earns 35,000 euros a year has increased by about 1,200 euros after the reform. To assess the impact of the reform, we use the difference-in-differences estimation approach. Using the panel structure of the French employment survey (1990-2000) we find that the probability of marriage has increased for stable couples by about 4 points because of the reform. In a second stage, the response of married women with children is analyzed, using as a control group women who did not have children before they married. We therefore identify the tax effect as the differences between the change in the labor supply of women with children before they married and the change in the labor supply of women without children before they married. We find strong evidence that the labor supply of married women has decreased due to the 1995 family quotient reform. Nevertheless, although our results support the working hours response, they are inconclusive as to participation response.
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 CIRPEE in its series Cahiers de recherche with number 0340.
Date of creation: 2003
Date of revision:
Labor supply; marriage; taxation; natural experiment;
Find related papers by JEL classification:
- J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
This paper has been announced in the following NEP Reports:
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.:
- Chiappori, Pierre-André & Fortin, Bernard & Lacroix, Guy, 2001.
"Marriage Market, Divorce Legislation and Household Labor Supply,"
Cahiers de recherche
0103, Université Laval - Département d'économique.
- Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
- Pierre-André Chiappori & Bernard Fortin & Guy Lacroix, 2001. "Marriage Market, Divorce Legislation and Household Labor Supply," CIRANO Working Papers 2001s-16, CIRANO.
- Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
- Ham, John C, 1982. "Estimation of a Labour Supply Model with Censoring Due to Unemployment and Underemployment," Review of Economic Studies, Wiley Blackwell, vol. 49(3), pages 335-54, July.
- Bargain, Olivier & Moreau, Nicolas, 2005.
"Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise,"
IZA Discussion Papers
1451, Institute for the Study of Labor (IZA).
- Bargain, Olivier & Moreau, Nicolas, 2003. "Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise," Cahiers de recherche 0308, CIRPEE.
- Olivier Bargain & Nicolas Moreau, 2002. "Is the collective model of labor supply useful for tax policy analysis ? A simulation exercise," DELTA Working Papers 2002-21, DELTA (Ecole normale supérieure).
- Olivier Bargain & Nicolas Moreau, 2003. "Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise," CESifo Working Paper Series 1052, CESifo Group Munich.
- Guy Laroque & Bernard Salanie, 2002. "Labour market institutions and employment in France," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(1), pages 25-48.
- Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
- Chiappori, Pierre-Andre, 1992.
"Collective Labor Supply and Welfare,"
Journal of Political Economy,
University of Chicago Press, vol. 100(3), pages 437-67, June.
- Olivier Donni, 2001.
"Collective Household Labor Supply: Nonparticipation and Income Taxation,"
Cahiers de recherche CREFE / CREFE Working Papers
140, CREFE, Université du Québec à Montréal.
- Donni, Olivier, 2003. "Collective household labor supply: nonparticipation and income taxation," Journal of Public Economics, Elsevier, vol. 87(5-6), pages 1179-1198, May.
- Bernard Fortin & Guy Lacroix, 2002. "Assessing the Impact of Tax and Transfer Policies on Labour Supply: A Survey," CIRANO Project Reports 2002rp-10, CIRANO.
- Stefania Marcassa & Fabrizio Colonna, 2011. "Taxation and Labor Force Participation: The Case of Italy," THEMA Working Papers 2011-22, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Fabrizio Colonna & Stefania Marcassa, 2013.
"Taxation and Labor Force Participation: The Case of Italy,"
- Colonna, Fabrizio & Marcassa, Stefania, 2012. "Taxation and Labor Force Participation: The Case of Italy," CEPREMAP Working Papers (Docweb) 1203, CEPREMAP.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Johanne Perron).
If references are entirely missing, you can add them using this form.