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Women’s and men’s responses to in-work benefits: the influence of children

Listed author(s):
  • Daniela Andrén

    ()

    (Örebro University School of Business)

  • Thomas Andrén

    ()

    (The Swedish Confederation of Professional Associations (Saco))

Abstract This study examines how the Swedish earned income tax credit (EITC) introduced in 2007 affected the labor supply of men and women living in two-adult households and the extent to which children in the household affected the outcome. Because the EITC is non-targeted in Sweden, it is difficult to form a meaningful comparison group for a regular ex-post quasi-experimental evaluation of the reform. Therefore, a structural discrete choice labor supply model for two-adult households is formulated and used in an ex ante analysis. In a first step, estimates from the structural labor supply model are used to determine the wage elasticities of the labor supply of men and women separately, both with and without children in the household. Our results correspond to those previously reported in the academic literature: somewhat larger wage elasticities are found for women than for men, while similar labor supply responses are found for men and women when there are no children in the household. In a second step, the labor supply model is used to simulate the labor supply responses to the EITC. Our results indicate that the largest response is on the extensive margin, with an increase in the labor force participation of both men and women. While the labor supply effect on the intensive margin is smaller, it is positive for both men and women working part-time. However, the presence of children affects work hours differently for men and women working part-time or not at all. For men, the percentage change in the work hours was much higher for those living in a household without children, whereas for women, the changes are almost the same for the two types of households.

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File URL: http://link.springer.com/10.1186/s40173-016-0059-8
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Article provided by Springer & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA) in its journal IZA Journal of Labor Policy.

Volume (Year): 5 (2016)
Issue (Month): 1 (December)
Pages: 1-24

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Handle: RePEc:spr:izalpo:v:5:y:2016:i:1:d:10.1186_s40173-016-0059-8
DOI: 10.1186/s40173-016-0059-8
Contact details of provider: Web page: http://www.springer.com

Web page: http://www.iza.org/en/webcontent/index_html?lang=en

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References listed on IDEAS
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  1. Lennart Flood & Jörgen Hansen & Roger Wahlberg, 2004. "Household Labor Supply and Welfare Participation in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
  2. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  3. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-589, August.
  4. Ericson, Peter & Flood, Lennart & Wahlberg, Roger, 2009. "SWEtaxben: A Swedish Tax/benefit Micro Simulation Model and an Evaluation of a Swedish Tax Reform," Working Papers in Economics 346, University of Gothenburg, Department of Economics.
  5. Löffler, Max & Peichl, Andreas & Siegloch, Sebastian, 2014. "Structural labor supply models and wage exogeneity," ZEW Discussion Papers 14-040, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  7. Altman, Morris, 2001. "A behavioral model of labor supply: casting some light into the black box of income-leisure choice," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 30(3), pages 199-219, May.
  8. Lennart Flood & Roger Wahlberg & Elina Pylkkänen, 2007. "From Welfare to Work: Evaluating a Tax and Benefit Reform Targeted at Single Mothers in Sweden," LABOUR, CEIS, vol. 21(3), pages 443-471, September.
  9. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  10. Löffler, Max & Peichl, Andreas & Siegloch, Sebastian, 2013. "Validating Structural Labor Supply Models," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79819, Verein für Socialpolitik / German Economic Association.
  11. Eva Mörk & Anna Sjögren & Helena Svaleryd, 2013. "Childcare costs and the demand for children—evidence from a nationwide reform," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(1), pages 33-65, January.
  12. Bargain, Olivier & Orsini, Kristian & Peichl, Andreas, 2011. "Labor Supply Elasticities in Europe and the US," IZA Discussion Papers 5820, Institute for the Study of Labor (IZA).
  13. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, December.
  14. N. S. Blomquist & U. Hansson-Brusewitz, 1990. "The Effect of Taxes on Male and Female Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 317-357.
  15. repec:hoo:wpaper:e-90-11 is not listed on IDEAS
  16. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  17. 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.
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