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Intensive Margins, Extensive Margins, and Spousal Allowances in the Japanes e System of Personal Income Taxes: A Discrete Choice Analysis

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  • Shun-ichiro Bessho

    (Faculty of Economics, Keio University)

  • Masayoshi Hayashi

    (Faculty of Economics, The University of Tokyo)

Abstract

   This study explores the effects of spousal allowances (SAs) in the Japanese system of personal income taxes, using the micro-simulation method based on the discrete choice model of labor supply. Our simulations show that the complete abolishment of SAs would increase the average annual working hours of all wives by 1.6% only, which is smaller than previous findings in the Japanese literature. If we focus on households benefiting from SAs, the rate of increase in the wife's working hours is even smaller (.1%). In addition, one particular case of SA reduction leads to a decrease in the labor supply of wives. We argue that these unexpected results are due to our explicit consideration of the fixed cost of labor market participations, which has been previously ignored in the Japanese studies.

Suggested Citation

  • Shun-ichiro Bessho & Masayoshi Hayashi, 2013. "Intensive Margins, Extensive Margins, and Spousal Allowances in the Japanes e System of Personal Income Taxes: A Discrete Choice Analysis," CIRJE F-Series CIRJE-F-912, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2013cf912
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    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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