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A Structural Estimation of the Effects of Spousal Tax Deduction and Social Security Systems on the Labor Supply of Japanese Married Women



Japanese spousal tax deduction and social security systems cause a non-convex piece-wise budget constraint for married women. Using a pooled sample from the Japanese Panel Survey of Consumers, we structurally estimated a labor supply model that explicitly takes into account the nonlinearity in the budget constraint. Our results suggest that the effects of spousal deduction and social security reforms on the labor supply of Japanese married women would be much smaller than what the past reduced form studies suggest. The reform to completely eliminate the spousal tax deduction would increase the population labor supply only by 0.7%, though the labor supply responses of the most affected workers would be nontrivial, with their desired hours worked increasing by as much as 4%. The policy reform to require all women to pay the social security premium regardless of their income level would have almost no effects on the population labor supply. Our results also suggest that lump-sum income transfer programs, such as the current child care support program, would have negligible effects on female labor supply unless the transfers are substantially large.

Suggested Citation

  • Shingo Takahashi, 2010. "A Structural Estimation of the Effects of Spousal Tax Deduction and Social Security Systems on the Labor Supply of Japanese Married Women," Working Papers EMS_2010_08, Research Institute, International University of Japan.
  • Handle: RePEc:iuj:wpaper:ems_2010_08

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    References listed on IDEAS

    1. Kuroda, Sachiko & Yamamoto, Isamu, 2008. "Estimating Frisch labor supply elasticity in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 566-585, December.
    2. Hideo Akabayashi, 2006. "The labor supply of married women and spousal tax deductions in Japan—a structural estimation," Review of Economics of the Household, Springer, vol. 4(4), pages 349-378, December.
    3. Masaru Sasaki, 2002. "The Causal Effect of Family Structure on Labor Force Participation among Japanese Married Women," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 429-440.
    4. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-1130, December.
    5. Yukiko Abe, 2009. "The Effects Of The 1.03 Million Yen Ceiling In A Dynamic Labor Supply Model," Contemporary Economic Policy, Western Economic Association International, vol. 27(2), pages 147-163, April.
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    Cited by:

    1. Bessho, Shun-ichiro & Hayashi, Masayoshi, 2014. "Intensive margins, extensive margins, and spousal allowances in the Japanese system of personal income taxes: A discrete choice analysis," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 162-178.
    2. YOKOYAMA, Izumi, 2015. "The Impact of Tax Reform in Japan on the Work-Hour and Income Distributions of Married Women," Discussion Papers 2015-02, Graduate School of Economics, Hitotsubashi University.

    More about this item


    Structural estimation; Non-convex budget set; Female labor supply; Spousal deduction; Social Security System;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies


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