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Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?

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  • Margherita Borella
  • Mariacristina De Nardi
  • Fang Yang

Abstract

In the United States, both taxes and old age Social Security benefits depend on one’s marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich dynamic life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments for the 1945 and 1955 birth cohorts. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people, and generates plausible elasticities of labor supply. It implies that eliminating these marriage-related provisions would drastically increase the participation of married women over their entire life cycle, reduce the participation of married men after age 60, and increase savings. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population. These results hold for both cohorts, including the later one, which has similar participation to that of more recent generations.

Suggested Citation

  • Margherita Borella & Mariacristina De Nardi & Fang Yang, 2019. "Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?," NBER Working Papers 26097, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:26097
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    Cited by:

    1. Giulia Giupponi, 2019. "When income effects are large: labor supply responses and the value of welfare transfers," CEP Discussion Papers dp1651, Centre for Economic Performance, LSE.
    2. John Bailey Jones & Yue Li, 2020. "Social Security Reform with Heterogeneous Mortality," Working Paper 20-09, Federal Reserve Bank of Richmond.
    3. Francesca Parodi, 2020. "Taxation of Consumption and Labor Income: a Quantitative Approach," Carlo Alberto Notebooks 609, Collegio Carlo Alberto.
    4. Serdar Birinci, 2019. "Spousal Labor Supply Response to Job Displacement and Implications for Optimal Transfers," Working Papers 2019-020, Federal Reserve Bank of St. Louis, revised Jan 2020.
    5. Giupponi, Giulia, 2019. "When income effects are large: labor supply responses and the value of welfare transfers," LSE Research Online Documents on Economics 103424, London School of Economics and Political Science, LSE Library.
    6. Jonas Meier, 2020. "Multivariate Distribution Regression," Diskussionsschriften dp2023, Universitaet Bern, Departement Volkswirtschaft.

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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