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Female market work, tax regimes, and the rise of the service sector

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  • Michelle Petersen Rendall

Abstract

US regional variation shows a positive correlation between the size of the service economy and female market hours, which is partially driven by different tax regimes. Based on this fact, this paper develops a multi-sector model to: (1) quantify the effect of different tax regimes in incentivizing woman to enter the labor force, and (2) estimate the feedback effect from women entering the labor force on the service sector size. Counterfactual results suggest that tax progressivity has a stronger effect than tax levels on married female market hours and the speed of structural transformation. In addition, married households react more to progressivity increases and single households are more sensitive to level changes. These results highlight that models ignoring tax structures (levels and progressivity) and household heterogeneity (dual versus single earning households) could lead to erroneous policy conclusions.

Suggested Citation

  • Michelle Petersen Rendall, 2015. "Female market work, tax regimes, and the rise of the service sector," IEW - Working Papers 492, Institute for Empirical Research in Economics - University of Zurich, revised Jul 2017.
    • Handle: RePEc:zur:iewwpx:492
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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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