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Taxation and Labor Supply of Married Couples across Countries: A Macroeconomic Analysis

Listed author(s):
  • Bick, Alexander

    ()

    (Arizona State University)

  • Fuchs-Schündeln, Nicola

    ()

    (Goethe University Frankfurt)

We document contemporaneous differences in the aggregate labor supply of married couples across 17 European countries and the US. Based on a model of joint household decision making, we quantify the contribution of international differences in non-linear labor income taxes and consumption taxes to the international differences in hours worked in the data. Through the lens of the model, taxes, together with wages and the educational composition, account for a significant part of the small differences in married men's and the large differences in married women's hours worked in the data. Taking the full nonlinearities of labor income tax codes, including the tax treatment of married couples, into account is crucial for generating the low cross-country correlation between married men's and women's hours worked in the data, and for explaining the variation of married women's hours worked across European countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10504.

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Length: 42 pages
Date of creation: Jan 2017
Handle: RePEc:iza:izadps:dp10504
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