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Taxation and marriage: Evidence from a natural experiment in France

Author

Listed:
  • Sophie Buffeteau

    () (INSEE, Paris France)

  • Damien Echevin

    () (GREDI, Département d'économique, Université de Sherbrooke)

Abstract

This paper uses the French family quotient reform of 1995 to analyze the impact of the individual income tax on marriage behavior. An important feature of this reform was the cancelation of fiscal subsidies aimed at cohabiting couples with children. Before 1995, the system of the family quotient granted one extra half unit to each single parent with children as defined for tax purposes. The 1995 family quotient reform cancels the benefit for cohabitants with children by introducing the notion of isolated parents with children in the tax declaration. This measure thus compensates the marriage penalty for couples with children but does not change anything for couples without children. To assess the impact of the reform, we use the difference-in-differences estimation approach. Using the panel structure of the French employment survey during the 1990’s we find high and heterogeneous effect of the reform on the probability of marriage. In particular, the probability of marriage has increased by about 5 points for young cohabitant couples with children, and by about 12 to 14 points when focusing on those with more than one kid or on those with less educated woman and higher educated man.

Suggested Citation

  • Sophie Buffeteau & Damien Echevin, 2008. "Taxation and marriage: Evidence from a natural experiment in France," Cahiers de recherche 08-01, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
  • Handle: RePEc:shr:wpaper:08-01
    as

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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0801.pdf
    File Function: First version, 2008
    Download Restriction: no

    References listed on IDEAS

    as
    1. Cornwell, Christopher & Rupert, Peter, 1997. "Unobservable Individual Effects, Marriage and the Earnings of Young Men," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 285-294, April.
    2. Laroque, Guy & Salanié, Bernard, 2005. "Does Fertility Respond to Financial Incentives?," CEPR Discussion Papers 5007, C.E.P.R. Discussion Papers.
    3. Nakosteen, Robert A & Zimmer, Michael A, 2001. "Spouse Selection and Earnings: Evidence of Marital Sorting," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 201-213, April.
    4. James Alm & Stacy Dickert-Conlin & Leslie A. Whittington, 1999. "Policy Watch: The Marriage Penalty," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 193-204, Summer.
    5. Bernard Fortin & Guy Lacroix, 2002. "Assessing the Impact of Tax and Transfer Policies on Labour Supply: A Survey," CIRANO Project Reports 2002rp-10, CIRANO.
    6. Jacobsen, Joyce P & Rayack, Wendy L, 1996. "Do Men Whose Wives Work Really Earn Less?," American Economic Review, American Economic Association, vol. 86(2), pages 268-273, May.
    7. Eng Seng Loh, 1996. "Productivity Differences and the Marriage Wage Premium for White Males," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 566-589.
    8. Chun, Hyunbae & Lee, Injae, 2001. "Why Do Married Men Earn More: Productivity or Marriage Selection?," Economic Inquiry, Western Economic Association International, vol. 39(2), pages 307-319, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Marriage; Income Taxation; Labor Supply; Natural Experiment;

    JEL classification:

    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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