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The impact of tax reforms on the labor supply of married women

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  • Dagsvik, John K
  • Montobbio, Fabio
  • Locatelli, Marilena
  • Soldani, Emilia
  • Strøm, Steinar

    (University of Turin)

Abstract

We show how a neoclassical labor supply model with optimal decisions for labor force participation and hours of work, derived from first order conditions, can be taken to data even in the presence of a step-wise linear progressive tax system which may imply non-convex budget sets. The estimated model is used to simulate the optimal behavior when the tax system of 2001 is replaced by the less progressive tax system of 2006. The latter tax system implies a lower labor market participation among married women in Norway, a higher working load, given participation, and a more uneven distribution of household income.

Suggested Citation

  • Dagsvik, John K & Montobbio, Fabio & Locatelli, Marilena & Soldani, Emilia & Strøm, Steinar, 2015. "The impact of tax reforms on the labor supply of married women," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201523, University of Turin.
    • Handle: RePEc:uto:dipeco:201523
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    References listed on IDEAS

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    1. Steinar StrØm & John K. Dagsvik, 2006. "Sectoral labour supply, choice restrictions and functional form," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(6), pages 803-826.
    2. MaCurdy, Thomas, 1992. "Work Disincentive Effects of Taxes: A Reexamination of Some Evidence," American Economic Review, American Economic Association, vol. 82(2), pages 243-249, May.
    3. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
    4. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
    5. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-1130, December.
    6. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-659, December.
    7. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
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