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Taxation and marriage: Evidence from a natural experiment in France

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  • Sophie Buffeteau

    ()
    (INSEE, Paris France)

  • Damien Echevin

    ()
    (GREDI, Département d'économique, Université de Sherbrooke)

Abstract

This paper uses the French family quotient reform of 1995 to analyze the impact of the individual income tax on marriage behavior. An important feature of this reform was the cancelation of fiscal subsidies aimed at cohabiting 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. To assess the impact of the reform, we use the difference-in-differences estimation approach. Using the panel structure of the French employment survey during the 1990’s we find high and heterogeneous effect of the reform on the probability of marriage. In particular, the probability of marriage has increased by about 5 points for young cohabitant couples with children, and by about 12 to 14 points when focusing on those with more than one kid or on those with less educated woman and higher educated man.

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File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0801.pdf
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Bibliographic Info

Paper provided by Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke in its series Cahiers de recherche with number 08-01.

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Length: 37 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:shr:wpaper:08-01

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Keywords: Marriage; Income Taxation; Labor Supply; Natural Experiment;

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  1. Guy Laroque & Bernard Salanié, 2008. "Does Fertility Respond to Financial Incentives ?," Working Papers 2008-10, Centre de Recherche en Economie et Statistique.
  2. Jacobsen, Joyce P & Rayack, Wendy L, 1996. "Do Men Whose Wives Work Really Earn Less?," American Economic Review, American Economic Association, vol. 86(2), pages 268-73, May.
  3. James Alm & Stacy Dickert-Conlin & Leslie A. Whittington, 1999. "Policy Watch: The Marriage Penalty," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 193-204, Summer.
  4. Nakosteen, Robert A & Zimmer, Michael A, 2001. "Spouse Selection and Earnings: Evidence of Marital Sorting," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 201-13, April.
  5. Chun, Hyunbae & Lee, Injae, 2001. "Why Do Married Men Earn More: Productivity or Marriage Selection?," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 307-19, April.
  6. Cornwell, Christopher & Rupert, Peter, 1997. "Unobservable Individual Effects, Marriage and the Earnings of Young Men," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 285-94, April.
  7. Eng Seng Loh, 1996. "Productivity Differences and the Marriage Wage Premium for White Males," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 566-589.
  8. Joni Hersch & Leslie S. Stratton, 2000. "Household specialization and the male marriage wage premium," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(1), pages 78-94, October.
  9. Bernard Fortin & Guy Lacroix, 2002. "Assessing the Impact of Tax and Transfer Policies on Labour Supply: A Survey," CIRANO Project Reports 2002rp-10, CIRANO.
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