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Spouse labor supply: fiscal incentive and income effect,evidence from French fully joint income tax system

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  • Clément Carbonnier

    () (THEMA - Université de Cergy-Pontoise, 33 boulevard du port, F 95011 Cergy-Pontoise cedex, France)

Abstract

The aim of the present paper is to measure the labor market participation elasticity with respect to income tax rates. A very complete data base of more than 500 000 observations a year is used. This data base is a large sample of the French income tax returns. The case of spouses is studied by comparing - for very similar couples - the probability of the secondary earner to participate in the labor market depending on the other foyer incomes on the one hand and depending on the tax rate which would apply on the income of this potential work on the other hand. Results find labor market participation elasticity with respect to income tax rate equal to -0.04 and with respect to income equal to -0.30. That for, it is outlined that joint income tax schedules have a negative impact on the secondary earners participation to labor market. As secondary earners are mainly women in France, joint income tax schedules have a negative impact on women participation to the labor market. Furthermore, different elasticities are measured for different population categories. Two phenomenons appear, they confirm each other partially. On the one hand, there is a difference between secondary earners more or less constrained to participate in the labor market. The more constrained ones have weaker elasticities than the less constrained ones. On the other hand, there is a major difference between the capital holders and the others. The capital holders’ elasticity with respect to income tax rate is higher than their elasticity with respect to income. The opposite occurred for the other households.

Suggested Citation

  • Clément Carbonnier, 2008. "Spouse labor supply: fiscal incentive and income effect,evidence from French fully joint income tax system," THEMA Working Papers 2008-20, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  • Handle: RePEc:ema:worpap:2008-20
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    File URL: http://thema.u-cergy.fr/IMG/documents/2008-20.pdf
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    References listed on IDEAS

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    1. Richard Blundell & Alan Duncan & Costas Meghir, 1998. "Estimating Labor Supply Responses Using Tax Reforms," Econometrica, Econometric Society, vol. 66(4), pages 827-862, July.
    2. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "The Optimal Income Taxation of Couples," Econometrica, Econometric Society, vol. 77(2), pages 537-560, March.
    3. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, pages 1-32.
    4. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, pages 450-477.
    5. Olivier Donni, 2007. "Collective female labour supply: theory and application," Economic Journal, Royal Economic Society, vol. 117(516), pages 94-119, January.
    6. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
    7. John K. Dagsvik & François Laisney & Steinar Strom & Jannike Ostervold, 1988. "Female Labour Supply and the Tax Benefit System in France," Annals of Economics and Statistics, GENES, issue 11, pages 5-40.
    8. François Bourguignon & Thierry Magnac, 1990. "Labor Supply and Taxation in France," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 358-389.
    9. Angrist, Joshua D & Evans, William N, 1998. "Children and Their Parents' Labor Supply: Evidence from Exogenous Variation in Family Size," American Economic Review, American Economic Association, pages 450-477.
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    Cited by:

    1. Olivier Bargain & Andreas Peichl, 2016. "Own-wage labor supply elasticities: variation across time and estimation methods," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), pages 1-31.
    2. Olivier Bargain & Andreas Peichl, 2013. "Steady-State Labor Supply Elasticities: An International Comparison," AMSE Working Papers 1322, Aix-Marseille School of Economics, Marseille, France.
    3. Olivier Bargain & Andreas Peichl, 2016. "Own-wage labor supply elasticities: variation across time and estimation methods," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), pages 1-31.
    4. Bargain, Olivier & Peichl, Andreas, 2013. "Steady-state labor supply elasticities: A survey," ZEW Discussion Papers 13-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    Labor supply; Time allocation; Fiscal incidence.;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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