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Taxation and Labor Force Participation: The Case of Italy

  • Fabrizio Colonna

    ()

    (Banca d'Italia)

  • Stefania Marcassa

    ()

    (Paris School of Economics)

Registered author(s):

    Italy has the lowest labor force participation of women among OECD countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Colonna_Marcassa_2011_taxation-labor-force.pdf
    File Function: First version, July 31, 2011
    Download Restriction: no

    Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-021.

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    Date of creation: Jul 2011
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    Handle: RePEc:hka:wpaper:2011-021
    Note: FI
    Contact details of provider: Web page: http://www.hceconomics.org/
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