Taxation and Household Labour Supply

Guner, Nezih; Kaygusuz, Remzi; Ventura, Gustavo

doi:10.1093/restud/rdr049

Cited by 167 publications

(107 citation statements)

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“…Moving from the current U.S. tax system to gender-based taxes generate aggregate welfare gains; they amount to 0.7% under a tax rate on married females of 8%, and about 0.4% under a tax rate of 4%. 12 As it was the case with proportional taxes, welfare gains display an inverted U-shape since younger households are negatively a¤ected as a group whereas middle-age ones gain. A central implication from these …ndings is that, even when there are non-trivial gains in taxing married women at proportionally lower rates than married males, the gains associated to moving to a simple proportional income tax are larger.…”

Section: Welfare Analysismentioning

confidence: 97%

Taxing women: A macroeconomic analysis

Guner

Kaygusuz

Ventura

2012

Journal of Monetary Economics

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Based on well-known evidence on labor supply elasticities, several authors have concluded that women should be taxed at lower rates than men. We evaluate the quantitative implications of taxing women at a lower rate than men. Relative to the current system of taxation, setting a proportional tax rate on married females equal to 4% (8%) increases output and married female labor force participation by about 3.9% (3.4%) and 6.9% (4.0%), respectively. Gender-based taxes improve welfare and are preferred by a majority of households. Nevertheless, welfare gains are higher when the U.S. tax system is replaced by a proportional, gender-neutral income tax.JEL Classi…cations: E62, H31, J12, J22

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Section: Welfare Analysismentioning

confidence: 97%

Taxing women: A macroeconomic analysis

Guner

Kaygusuz

Ventura

2012

Journal of Monetary Economics

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“…It is even possible that because of the tax progressivity, low earners face lower tax rates in Europe compared to the U.S. Another important feature of tax systems is joint vs. separate taxation. Guner et al (2012) point out how separate taxation of married couples encourages female labor supply through lowering the tax rate on the secondary earner in a married couple (usually the female). 21 Because of the gender wage gap, men are more likely to be among the high earners.…”

Section: Model Fitmentioning

confidence: 99%

Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe

Chakraborty

Holter

Stepanchuk

2015

Journal of Monetary Economics

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a b s t r a c tAmericans work more than Europeans. Using micro-data from the United States and 17 European countries, we document that women are typically the largest contributors to the cross-country differences in work hours. We also show that there is a negative relation between taxes and annual hours worked, driven by men, and a positive relation between divorce rates and annual hours worked, driven by women. In a calibrated life-cycle model with heterogeneous agents, marriage and divorce, we find that the divorce and tax mechanisms together can explain 45% of the variation in labor supply between the United States and the European countries.& 2015 Elsevier B.V. All rights reserved. IntroductionIt is a well-known empirical finding that aggregate hours worked are higher in the United States than in Europe and that there is also substantial variation among European countries; see for instance Prescott (2004) and Rogerson (2006). These differences deserve attention: Rogerson (2006) notes that they are an order of magnitude larger than the fluctuations at business cycle frequencies in post-WWII U.S. data. Are the differences in hours worked due to public policies or are they due to other fundamental differences between societies?This paper has two contributions: first, it documents, using cross-country data, that there is a negative relation between taxes and annual hours worked and a positive relation between divorce rate and annual hours worked. While the first relation is well-known, the second one is new, at least from a cross-country perspective. Furthermore, this paper shows that the negative relation between taxes and hours is driven by the behavior of men (i.e. for women the correlation between taxes and hours is close to zero) and the positive relation between divorce and hours is driven by the behavior of women (i.e. for men the correlation between divorce and hours is close to zero).Second, motivated by these two facts, this paper builds a life cycle model economy populated by heterogenous agents in which both taxes and marital instability affect hours of work. In the model economy, the marital transitions are exogenous, but given these exogenous transitions agents adjust their labor supply and savings behavior. An important assumption is that the labor force participation is associated with higher future earnings, as agents accumulate experience. The model is then calibrated to the U.S. and is used to evaluate how much cross-country differences in taxes and marriage and divorce rates can account for cross-country differences in hours worked. To this end, we use the calibrated economy and change taxes and/or marriage and divorce rates. The results show that taxes play an important role for differences in male hours, while differences in marriage and divorce explain differences in female hours.We begin by using micro-level data to document the contribution of various demographic groups to the aggregate differences in hours worked between the U.S. and 17 European countries (Western Europe, except Icelan...

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“…Eckstein et al (2016) examine the changes over time in the selection of married women working and find that it accounts for 75% of the observed increase in the marriage-wage premium (the differential in salary for married versus single women) increase over time. Guner et al (2012) find that genderbased taxes, implying that women face lower and proportional income tax rates, increase output and female labor participation and improve welfare. Kaygusuz (2015) studies the effects of the Economic Recovery Tax Act of 1981 on married female labor force participation.…”

Section: Related Literaturementioning

confidence: 94%

The Aggregate Implications of Gender and Marriage

Borella

Nardi²,

Yang

2016

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a b s t r a c tWages, labor market participation, hours worked, and savings differ by gender and marital status. In addition, women and married people make up a large fraction of the population and of labor market participants, total hours worked, and total earnings. For the most part, macroeconomists have been ignoring women and marriage in setting up structural models and in calibrating them using data on males only. In this paper, we ask whether ignoring gender and marriage in both models and data implies that the resulting calibration matches well the key economic aggregates. We find that it does not and we ask whether there are other calibration strategies or relatively simple models of marriage that can improve the fit of the model to aggregate data.Ó 2017 Published by Elsevier B.V. IntroductionWages, labor market participation, hours worked, and savings differ by gender and marital status. In addition, women and married people 1 make up a large fraction of the population and of labor market participants, total hours worked, and total earnings. For the most part, macroeconomists have been ignoring women and marriage in setting up life-cycle structural models and in calibrating them using data on males only. In this paper, we ask whether ignoring gender and marriage in both models and data implies that the resulting calibration matches well the key economic aggregates of labor participation, hours worked, labor income, and net worth. We find that it does not and we ask whether there are other calibration strategies or relatively simple models of marriage that can improve the model fit along these important dimensions.To investigate the aggregate importance of gender and marriage and to determine what might be the simplest model that best captures the most important aggregates, we construct and calibrate four different economies. Economy 1 is a ''No marriage, only men", economy that adopts a standard one-gender, no marriage, lifecycle framework, and only uses data on men for calibration purposes, as usually done in quantitative macro models. We find that this model economy (and calibration) misses the observed economy's aggregate outcomes, including labor supply, earnings, and hours by a large amount over all of the working period. More specifically, this economy drastically overestimates participation by about 10-20 percentage points, overestimates average hours by over one-third of actual aggregate hours, and also overestimates average earnings by over one-third over the entire working period. It also underestimates retirement savings.Economy 2 is a ''No marriage, men and women together" economy that uses the same model as Economy 1, but is calibrated using data on both men and women together, as individual-level data, thus ignoring any gender differences and whether individuals are in couples or not. If this kind of ''aggregation" were to match the aggregates well, this would be a possible way to take gender and marriage into account without writing a more complicated model. The biggest success of this ca...

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Taxation and Household Labour Supply

Cited by 167 publications

References 47 publications

Taxing women: A macroeconomic analysis

Taxing women: A macroeconomic analysis

Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe

The Aggregate Implications of Gender and Marriage

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