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Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe

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  • Chakraborty, Indraneel
  • Holter, Hans A.
  • Stepanchuk, Serhiy

Abstract

Americans work more than Europeans. Using micro-data from the United States and 17 European countries, we document that women are typically the largest contributors to the cross-country differences in work hours. We also show that there is a negative relation between taxes and annual hours worked, driven by men, and a positive relation between divorce rates and annual hours worked, driven by women. In a calibrated life-cycle model with heterogeneous agents, marriage and divorce, we find that the divorce and tax mechanisms together can explain 45% of the variation in labor supply between the United States and the European countries.

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  • Chakraborty, Indraneel & Holter, Hans A. & Stepanchuk, Serhiy, 2015. "Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 1-20.
    • Handle: RePEc:eee:moneco:v:72:y:2015:i:c:p:1-20
    DOI: 10.1016/j.jmoneco.2015.01.001
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    Cited by:

    1. Alexander Bick & Nicola Fuchs-Schündeln, 2018. "Taxation and Labour Supply of Married Couples across Countries: A Macroeconomic Analysis," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(3), pages 1543-1576.
    2. Hans A. Holter & Dirk Krueger & Serhiy Stepanchuk, 2019. "How do tax progressivity and household heterogeneity affect Laffer curves?," Quantitative Economics, Econometric Society, vol. 10(4), pages 1317-1356, November.
    3. Duval-Hernández, Robert & Fang, Lei & Ngai, L. Rachel, 2023. "Taxes, subsidies, and gender gaps in hours and wages," LSE Research Online Documents on Economics 118061, London School of Economics and Political Science, LSE Library.
    4. Bick, Alexander & Brüggemann, Bettina & Fuchs-Schündeln, Nicola & Paule-Paludkiewicz, Hannah, 2019. "Long-term changes in married couples' labor supply and taxes: Evidence from the US and Europe since the 1980s," Journal of International Economics, Elsevier, vol. 118(C), pages 44-62.
    5. Max Groneck & Johanna Wallenius, 2021. "It Sucks to Be Single! Marital Status and Redistribution of Social Security [Female labor supply as insurance against idiosyncratic risk]," The Economic Journal, Royal Economic Society, vol. 131(633), pages 327-371.
    6. Francisco Perez‐Arce & María J. Prados, 2021. "The Decline In The U.S. Labor Force Participation Rate: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 35(2), pages 615-652, April.
    7. Robert Duval-Hernández & Lei Fang & L. Rachel Ngai, 2018. "Social Subsidies and Marketization – the Role of Gender and Skill," SOEPpapers on Multidisciplinary Panel Data Research 962, DIW Berlin, The German Socio-Economic Panel (SOEP).
    8. Robert Duval-Hernandez & Lei Fang & L. Rachel Ngai, 2021. "Taxes, Subsidies, and Gender Gaps in Hours and Wages," FRB Atlanta Working Paper 2021-17, Federal Reserve Bank of Atlanta.
    9. Agustin Velasquez & Svetlana Vtyurina, 2019. "How Does Taxation Affect Hours Worked in EU New Member States?," IMF Working Papers 2019/130, International Monetary Fund.
    10. Feng, Zhigang & Zhao, Kai, 2018. "Employment-based health insurance and aggregate labor supply," Journal of Economic Behavior & Organization, Elsevier, vol. 154(C), pages 156-174.
    11. Behringer, Jan & Gonzalez Granda, Martin & van Treeck, Till, 2022. "Varieties of the rat race: Working hours in the age of abundance," ifso working paper series 17, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    12. Fang, Lei & Yang, Fang, 2022. "Consumption and hours in the United States and Europe," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    13. Michelle Rendall, 2018. "Female Market Work, Tax Regimes, and the Rise of the Service Sector," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 269-289, April.
    14. Nicola Fuchs-Schündeln & Alexander Bick, 2014. "Taxation and Labor Supply of Married Women across Countries: A Macroeconomic Analysis," 2014 Meeting Papers 321, Society for Economic Dynamics.
    15. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2014. "Income Taxation of U.S. Households: Facts and Parametric Estimates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 559-581, October.
    16. Robert Duval‐Hernández & Lei Fang & L. Rachel Ngai, 2023. "Taxes, subsidies and gender gaps in hours and wages," Economica, London School of Economics and Political Science, vol. 90(358), pages 373-408, April.
    17. Tobias Laun & Johanna Wallenius, 2021. "Having It All? Employment, Earnings, and Children," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 353-381, January.
    18. Robert Duval-Hernandez & Lei Fang & L. Rachel Ngai, 2017. "Taxes and Market Hours: The Role of Gender and Skill," FRB Atlanta Working Paper 2017-8, Federal Reserve Bank of Atlanta.
    19. Storesletten, Kjetil & Halvorsen, Elin & Holter, Hans & Ozkan, Serdar, 2020. "Dissecting Idiosyncratic Earnings Risk," CEPR Discussion Papers 15395, C.E.P.R. Discussion Papers.
    20. Lei Fang & Fang Yang, 2021. "Consumption and Hours between the United States and France," FRB Atlanta Working Paper 2021-7, Federal Reserve Bank of Atlanta.
    21. De Dominicis, Piero, 2020. "Routinization and Covid-19: a comparison between United States and Portugal," MPRA Paper 101003, University Library of Munich, Germany.
    22. Anne Hannusch, 2019. "Taxing Families: The Impact of Child-related Transfers on Maternal Labor Supply," CRC TR 224 Discussion Paper Series crctr224_2019_067v2, University of Bonn and University of Mannheim, Germany.
    23. Nezih Guner & Remzi Kaygusuz & Gustavo Ventura, 2014. "Income Taxation of U.S. Households: Facts and Parametric Estimates," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 559-581, October.
    24. Frank T Denton & Byron G Spencer & Terry A Yip, 2020. "Changes and Stability in Marital Status: Evidence from Canadian Income Tax Returns," Department of Economics Working Papers 2020-07, McMaster University.

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    More about this item

    Keywords

    Aggregate labor supply; Taxation; Marriage; Divorce; Heterogeneous households;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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