Taxation and marriage: Evidence from a natural experiment in France

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.