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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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    References listed on IDEAS

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    Cited by:

    1. Chakraborty, Indraneel & Holter, Hans A. & Stepanchuk, Serhiy, 2015. "Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 1-20.
    2. Du Rietz, Gunnar & Henrekson, Magnus & Waldenström, Daniel, 2012. "Swedish Inheritance and Gift Taxation, 1885–2004," Working Paper Series 2012:18, Uppsala University, Department of Economics, revised 04 Aug 2015.
    3. L. Rachel Ngai & Barbara Petrongolo, 2017. "Gender Gaps and the Rise of the Service Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(4), pages 1-44, October.
    4. Alessio Moro & Solmaz Moslehi & Satoshi Tanaka, 2017. "Does Home Production Drive Structural Transformation?," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(3), pages 116-146, July.
    5. Claudia Olivetti & Barbara Petrongolo, 2014. "Gender gaps across countries and skills: Demand, supply and the industry structure," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 842-859, October.
    6. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941 Elsevier.
    7. Alexander Bick & Nicola Fuchs-Schündeln & David Lagakos, 2018. "How Do Hours Worked Vary with Income? Cross-Country Evidence and Implications," American Economic Review, American Economic Association, vol. 108(1), pages 170-199, January.
    8. Bick, Alexander & Fuchs-Schündeln, Nicola, 2017. "Taxation and Labor Supply of Married Couples across Countries: A Macroeconomic Analysis," IZA Discussion Papers 10504, Institute for the Study of Labor (IZA).
    9. Claudia Olivetti & Barbara Petrongolo, 2016. "The Evolution of Gender Gaps in Industrialized Countries," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 405-434, October.
    10. Rendall, Michelle, 2013. "Structural Change in Developing Countries: Has it Decreased Gender Inequality?," World Development, Elsevier, vol. 45(C), pages 1-16.
    11. Claudia Olivetti, 2014. "The Female Labor Force and Long-Run Development: The American Experience in Comparative Perspective," NBER Chapters,in: Human Capital in History: The American Record, pages 161-197 National Bureau of Economic Research, Inc.
    12. Bridgman, Benjamin, 2016. "Home productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 71(C), pages 60-76.
    13. Aysegul Sahin & Stefania Albanesi, 2013. "Jobless Recoveries and Gender Biased Technological Change," 2013 Meeting Papers 985, Society for Economic Dynamics.
    14. Claudia Olivetti & Rachel Ngai, 2015. "Structural Transformation and the U-Shaped Female Labor Supply," 2015 Meeting Papers 1501, Society for Economic Dynamics.
    15. Bick, Alexander & Fuchs-Schündeln, Nicola & Lagakos, David, 2016. "How do Average Hours Worked Vary with Development? Cross-Country Evidence and Implications," CEPR Discussion Papers 11092, C.E.P.R. Discussion Papers.
    16. Dürnecker, Georg & Herrendorf, Berthold, 2014. "On the Allocation of Time," Working Papers 14-09, University of Mannheim, Department of Economics.
    17. Olivetti, Claudia & Petrongolo, Barbara, 2016. "The evolution of the gender gap in industrialized countries," CEPR Discussion Papers 11034, C.E.P.R. Discussion Papers.
    18. Nicola Fuchs-Schuendeln & David Lagakos & Alexander Bick, 2015. "Measuring and Explaining International Differences in Hours Worked," 2015 Meeting Papers 592, Society for Economic Dynamics.

    More about this item

    Keywords

    Technological progress; sectoral labor allocation; female labor supply; labor demand; taxation;

    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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