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Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988

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  • Thomas F. Crossley
  • Sung-Hee Jeon

Abstract

The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non-refundable tax credit. This reduced the "jointness" of the tax system: after the reform, secondary earners' effective "first dollar" marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective "first dollar" marginal tax rates faced by women with high income husbands were particularly reduced. Using difference-in-difference estimators, we find a significant increase in labour force participation among women married to higher income husbands.

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Bibliographic Info

Paper provided by McMaster University in its series Quantitative Studies in Economics and Population Research Reports with number 404.

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Length: 43 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:mcm:qseprr:404

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Keywords: Labour supply; Canadian tax reform; Married women; Difference-in-difference;

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References

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  1. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-61, April.
  2. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  3. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
  4. John Piggott & John Whalley, 1994. "The Tax Unit and Household Production," NBER Working Papers 4820, National Bureau of Economic Research, Inc.
  5. LaLumia, Sara, 2008. "The effects of joint taxation of married couples on labor supply and non-wage income," Journal of Public Economics, Elsevier, vol. 92(7), pages 1698-1719, July.
  6. Gerald Auten & Robert Carroll, 1999. "The Effect Of Income Taxes On Household Income," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 681-693, November.
  7. Patricia F. Apps & Ray Rees, 1999. "Individual versus Joint Taxation in Models with Household Production," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 393-403, April.
  8. 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.
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Cited by:
  1. Stevenson, Adam, 2012. "The Labor Supply And Tax Revenue Consequences Of Federal Same-Sex Marriage Legalization," National Tax Journal, National Tax Association, vol. 65(4), pages 783-806, December .
  2. Sule Alan & Kadir Atalay & Thomas F. Crossley & Sung-Hee Jeon, 2009. "New Evidence on Taxes and Portfolio Choice," Social and Economic Dimensions of an Aging Population Research Papers 245, McMaster University.
  3. Egger, Peter H. & Radulescu, Doina M., 2012. "Family policy and the number of children: Evidence from a natural experiment," European Journal of Political Economy, Elsevier, vol. 28(4), pages 524-539.
  4. Schröder, Melanie & Schmitt, Norma & Heynemann, Britta & Brünn, Claudia, 2013. "Income Taxation and Labor Supply: An Experiment on Couple's Work E ffort," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79735, Verein für Socialpolitik / German Economic Association.
  5. Klara Kaliskova, 2013. "Family Taxation and the Female Labor Supply: Evidence from the Czech Republic," CERGE-EI Working Papers wp496, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  6. Selin, Håkan, 2009. "The Rise in Female Employment and the Role of Tax Incentives. An Empirical Analysis of the Swedish Individual Tax Reform of 1971," Working Paper Series 2009:4, Uppsala University, Department of Economics.

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