Long-term Changes in Married Couples' Labor Supply and Taxes: Evidence from the US and Europe Since the 1980s

We document the time-series of employment rates and hours worked per employed by married couples in the US and seven European countries (Belgium, France, Germany, Italy, the Netherlands, Portugal, and the UK) from the early 1980s through 2016. Relying on a model of joint household labor supply decisions, we quantitatively analyze the role of non-linear labor income taxes for explaining the evolution of hours worked of married couples over time, using as inputs the full country- and year-specific statutory labor income tax codes. We further evaluate the role of consumption taxes, gender and educational wage premia, the educational distribution, and the degree of assortative matching into couples. The model is quite successful in predicting the time series behavior of hours worked per employed married woman, with labor income taxes being the key driving force. It also explains part of the secular increase in married women's employment rates, but the large increases among European married women in the 1980s and early 1990s are not driven by the factors considered in our study. We will make the non-linear tax codes used as an input into the analysis available as a user-friendly and easily integrable set of Matlab codes.