IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp6392.html
   My bibliography  Save this paper

Labour Supply and Taxes: New Estimates of the Responses of Wives to Husbands' Wages

Author

Listed:
  • Dostie, Benoit

    (HEC Montreal)

  • Kromann, Lene

    (CEBR, Copenhagen)

Abstract

In this paper, we estimate income- and substitution- labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996-2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and non-labour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.

Suggested Citation

  • Dostie, Benoit & Kromann, Lene, 2012. "Labour Supply and Taxes: New Estimates of the Responses of Wives to Husbands' Wages," IZA Discussion Papers 6392, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6392
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp6392.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bruce D. Meyer, 2002. "Labor Supply at the Extensive and Intensive Margins: The EITC, Welfare, and Hours Worked," American Economic Review, American Economic Association, vol. 92(2), pages 373-379, May.
    2. Osberg, Lars & Phipps, Shelley, 1993. "Labour Supply with Quantity Constraints: Estimates from a Large Sample of Canadian Workers," Oxford Economic Papers, Oxford University Press, vol. 45(2), pages 269-291, April.
    3. René Morissette & Feng Hou, 2008. "Does the labour supply of wives respond to husbands' wages? Canadian evidence from micro data and grouped data," Canadian Journal of Economics, Canadian Economics Association, vol. 41(4), pages 1185-1210, November.
    4. Paul J. Devereux, 2004. "Changes in Relative Wages and Family Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    5. Shelley A. Phipps, 1991. "Behavioural Response to UI Reform in Constrained and Unconstrained Models of Labour Supply," Canadian Journal of Economics, Canadian Economics Association, vol. 24(1), pages 34-54, February.
    6. Angrist, Joshua D., 1991. "Grouped-data estimation and testing in simple labor-supply models," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 243-266, February.
    7. Richard P. Chaykowski & Lisa M. Powell, 1999. "Women and the Labour Market: Recent Trends and Policy Issues," Canadian Public Policy, University of Toronto Press, vol. 25(s1), pages 2-25, November.
    8. Charles Michalopoulos & Philip K. Robins, 2000. "Employment and child-care choices in Canada and the United States," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 435-470, May.
    9. Devereux, Paul J., 2007. "Improved Errors-in-Variables Estimators for Grouped Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 278-287, July.
    10. Nakamura, Alice & Nakamura, Masao, 1985. "Dynamic models of the labor force behavior of married women which can be estimated using limited amounts of past information," Journal of Econometrics, Elsevier, vol. 27(3), pages 273-298, March.
    11. Bradley T. Heim, 2007. "The Incredible Shrinking Elasticities: Married Female Labor Supply, 1978–2002," Journal of Human Resources, University of Wisconsin Press, vol. 42(4).
    12. Nakamura, Masao & Nakamura, Alice & Cullen, Dallas, 1979. "Job Opportunities, the Offered Wage, and the Labor Supply of Married Women," American Economic Review, American Economic Association, vol. 69(5), pages 787-805, December.
    13. Alice Nakamura & Masao Nakamura, 1983. "Part-Time and Full-Time Work Behaviour of Married Women: A Model with a Doubly Truncated Dependent Variable," Canadian Journal of Economics, Canadian Economics Association, vol. 16(2), pages 229-257, May.
    14. Lisa M. Powell, 2002. "Joint Labor Supply and Childcare Choice Decisions of Married Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 106-128.
    15. Lisa M. Powell, 1997. "The Impact of Child Care Cost on the Labour Supply of Married Mothers: Evidence from Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 577-594, August.
    16. Pierre Lefebvre & Philip Merrigan, 2008. "Child-Care Policy and the Labor Supply of Mothers with Young Children: A Natural Experiment from Canada," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 519-548, July.
    17. Paul J. Devereux, 2007. "Small-sample bias in synthetic cohort models of labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 839-848.
    18. J. Barry Smith & Morton Stelcner, 1988. "Labour Supply of Married Women in Canada, 1980," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 857-870, November.
    19. René Morissette & Feng Hou, 2008. "Does the labour supply of wives respond to husbands' wages? Canadian evidence from micro data and grouped data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(4), pages 1185-1210, November.
    20. Emmanuel Saez & Michael R. Veall, 2005. "The Evolution of High Incomes in Northern America: Lessons from Canadian Evidence," American Economic Review, American Economic Association, vol. 95(3), pages 831-849, June.
    21. Chris Robinson & Nigel Tomes, 1985. "More on the Labour Supply of Canadian Women," Canadian Journal of Economics, Canadian Economics Association, vol. 18(1), pages 156-163, February.
    22. Eduardo Pontual Ribeiro, 2001. "Asymmetric labor supply," Empirical Economics, Springer, vol. 26(1), pages 183-197.
    23. Nakamura, Alice & Nakamura, Masao, 1981. "A Comparison of the Labor Force Behavior of Married Women in the United States and Canada, with Special Attention to the Impact of Income Taxes," Econometrica, Econometric Society, vol. 49(2), pages 451-489, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. René Morissette & Feng Hou, 2008. "Does the labour supply of wives respond to husbands' wages? Canadian evidence from micro data and grouped data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(4), pages 1185-1210, November.
    2. Shelly Lundberg & Aloysius Siow, 2017. "Canadian contributions to family economics," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1304-1323, December.
    3. Nakamura, Alice & Nakamura, Masao, 1998. "Model specification and endogeneity," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 213-237.
    4. Ren頍orissette & Yuqian Lu & Feng Hou, 2012. "Marriage, cohabitation and women's response to changes in the male wage structure," Applied Economics, Taylor & Francis Journals, vol. 44(19), pages 2499-2516, July.
    5. Atallah, Gamal, 1998. "Les impôts sur le revenu et l’offre de travail des femmes mariées : une revue de la littérature," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(1), pages 95-128, mars.
    6. Müller, Kai-Uwe & Wrohlich, Katharina, 2020. "Does subsidized care for toddlers increase maternal labor supply? Evidence from a large-scale expansion of early childcare," Labour Economics, Elsevier, vol. 62(C).
    7. Hou, Feng & Lu, Yuqian & Morissette, René, 2009. "Marriage, Cohabitation and Women’s Response to Changes in the Male Wage Structure," CLSSRN working papers clsrn_admin-2009-45, Vancouver School of Economics, revised 30 Aug 2009.
    8. Paul J. Devereux, 2007. "Small-sample bias in synthetic cohort models of labor supply," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(4), pages 839-848.
    9. Mehrotra, Santosh & Parida, Jajati K., 2017. "Why is the Labour Force Participation of Women Declining in India?," World Development, Elsevier, vol. 98(C), pages 360-380.
    10. repec:eee:labchp:v:1:y:1986:i:c:p:103-204 is not listed on IDEAS
    11. Michael T. Maloney & Robert E. McCormick, 2000. "The Response of Workers to Wages in Tournaments," Journal of Sports Economics, , vol. 1(2), pages 99-123, May.
    12. Vinod Mishra & Russell Smyth, 2012. "Work Hours in Chinese Enterprises: Evidence From Matched Employer-Employee Data," Monash Economics Working Papers 10-12, Monash University, Department of Economics.
    13. Lusi Liao & Sasiwimon Warunsiri Paweenawat, 2018. "Labour Supply of Married Women in Thailand: 1985–2016," PIER Discussion Papers 88, Puey Ungphakorn Institute for Economic Research.
    14. Yusuf Emre Akgunduz & Janneke Plantenga, 2018. "Child Care Prices And Maternal Employment: A Meta†Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 32(1), pages 118-133, February.
    15. Devereux, Paul J., 2007. "Improved Errors-in-Variables Estimators for Grouped Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 278-287, July.
    16. Guyonne Kalb, 2009. "Children, Labour Supply and Child Care: Challenges for Empirical Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(3), pages 276-299, September.
    17. Y.E. Akgündüz & J. Plantenga, 2015. "Childcare Prices and Maternal Employment: a Meta-Analysis," Working Papers 15-14, Utrecht School of Economics.
    18. Alwang, Jeffrey Roger & Stallmann, Judith I., 1992. "Supply And Demand For Married Female Labor: Rural And Urban Differences In The Southern United States," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 24(2), pages 1-14, December.
    19. Zamnius, Alexey & Polbin, Andrey, 2021. "Estimating intertemporal elasticity of substitution of labor supply for married women in Russia," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 64, pages 23-48.
    20. Rumman Khan, 2021. "Assessing Sampling Error in Pseudo‐Panel Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(3), pages 742-769, June.

    More about this item

    Keywords

    labour supply; elasticities; labour force participation; taxes; Canada;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6392. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.