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The rise in female employment and the role of tax incentives. An empirical analysis of the Swedish individual tax reform of 1971

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  • Håkan Selin

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Abstract

Sweden reached the 2009 OECD average level of female labor force participation already in 1974. Before 1971 spouses were taxed jointly. This meant that the wife’s financial gain of working was a function of the husband’s income. The higher income of the husband, the lower was the wife’s work incentive ceteris paribus. After the reform, the link between the husband’s income and the wife’s participation tax rate was, in principle, abolished. This paper exploits a rich longitudinal register data source and the large variation provided by the individual tax reform to analyze the evolution of female employment in Sweden in the years surrounding the 1971 reform. I provide clear evidence that employment grew considerably more among women married to high-income earners in the years following the announcement of the reform, especially among households with kids. Estimated participation elasticities are in the range 0.5–1 for the total sample. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Håkan Selin, 2014. "The rise in female employment and the role of tax incentives. An empirical analysis of the Swedish individual tax reform of 1971," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(5), pages 894-922, October.
  • Handle: RePEc:kap:itaxpf:v:21:y:2014:i:5:p:894-922
    DOI: 10.1007/s10797-013-9283-y
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Spencer Bastani & Ylva Moberg & Håkan Selin, 2016. "Estimating Participation Responses Using Transfer Program Reform," CESifo Working Paper Series 5781, CESifo Group Munich.
    2. repec:kap:reveho:v:16:y:2018:i:2:d:10.1007_s11150-016-9345-x is not listed on IDEAS
    3. Bastani, Spencer & Moberg, Ylva & Selin, Håkan, 2016. "The Anatomy of the Extensive Margin Labor Supply Response," Working Paper Series 2016:11, Uppsala University, Department of Economics.
    4. repec:eee:hapoch:v1_457 is not listed on IDEAS
    5. Lundberg, Jacob, 2017. "Analyzing tax reforms using the Swedish Labour Income Microsimulation Model," Working Paper Series 2017:12, Uppsala University, Department of Economics.
    6. Melanie Schröder & Norma Burow, 2016. "Couple's Labor Supply, Taxes, and the Division of Housework in a Gender-Neutral Lab," Discussion Papers of DIW Berlin 1593, DIW Berlin, German Institute for Economic Research.

    More about this item

    Keywords

    Female labor supply; Income tax reforms; J21; H24;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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