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Taxing Families: The Impact of Child-Related Transfers on Maternal Labor Supply

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  • Anne Hannusch

Abstract

Childbirth causes persistent gender differences in labor force participation and the difference in employment rates of married women with and without pre-school children varies substantially across countries. To what extent can child-related transfers account for this differential? To answer this question, I develop a life-cycle model of joint labor supply, in which female human capital evolves endogenously and a fraction of households has access to informal childcare. I calibrate the model to the US and Denmark, two countries in which the gap in employment rates of women with and without pre-school children differs in sign and magnitude: the gap is 13.2% in the US and -3.7% in Denmark. After taking the labor income tax treatment of married couples and variation in childcare fees into account, I find that child-related transfers are key to explaining the positive gap in the US and the negative gap in Denmark. I show that this mechanism is quantitatively important to account for variation in the maternal participation gap across other European countries as well.

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  • Anne Hannusch, 2019. "Taxing Families: The Impact of Child-Related Transfers on Maternal Labor Supply," CRC TR 224 Discussion Paper Series crctr224_2019_067, University of Bonn and University of Mannheim, Germany.
    • Handle: RePEc:bon:boncrc:crctr224_2019_067
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    Cited by:

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    2. Komada, Oliwia, 2024. "Raising America’s future: Search for optimal child-related transfers," Economic Modelling, Elsevier, vol. 138(C).
    3. Alon, Titan & Doepke, Matthias & Olmstead-Rumsey, Jane & Tertilt, Michèle, 2020. "This Time It's Different: The Role of Women's Employment in a Pandemic Recession," IZA Discussion Papers 13562, Institute of Labor Economics (IZA).
    4. Das, Debasmita, 2022. "Child-rearing, Social Security and Married Women’s Labor Supply over the Life Cycle," MPRA Paper 117614, University Library of Munich, Germany, revised 10 Sep 2022.
    5. Tertilt, Michèle & Doepke, Matthias & Olmstead-Rumsey, Jane, 2020. "This Time It’s Different: The Role of Women’s Employment in a Pandemic Recession," CEPR Discussion Papers 15149, C.E.P.R. Discussion Papers.
    6. Andre Luduvice, 2021. "The Macroeconomic Effects of Universal Basic Income Programs," Working Papers 21-21, Federal Reserve Bank of Cleveland.
    7. Cruces, Lidia, 2024. "A quantitative theory of the new life cycle of women's employment," Journal of Economic Dynamics and Control, Elsevier, vol. 169(C).
    8. Oliwia Komada, 2023. "Raising America's future: search for optimal child-related transfers," GRAPE Working Papers 84, GRAPE Group for Research in Applied Economics.

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    More about this item

    Keywords

    Maternal Labor Supply; Two-earner Households; Family Transfers; Taxation;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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