Taxes, Subsidies, and Gender Gaps in Hours and Wages

Abstract

Using micro data from 17 countries in the Organisation for Economic Co-operation and Development, this paper documents a negative cross-country correlation between gender ratios in market hours and wages. We find that market hours by women and the size of the service sector that produces close substitutes to home production are important for the gender differences in market hours across countries. We quantify the role played by taxes and subsidies to family care on the two gender ratios in a multisector model with home production. Higher taxes and lower subsidies reduce the marketization of home production and therefore reduce market hours. The effect is larger for women because of their comparative advantage in producing home services and the corresponding market substitutes. The larger fall in female market hours drives up the female wage relative to the male wage, resulting in higher gender wage ratios.

Decomposing the Gender Pay Gap in Colombia: Do Industry and Type of Worker Matter?

“…Even tax and subsidy structures might play a role in determining gender equality (see c.f. Duval-Hernandez et al, 2021). In this way, promoting women's employment in male-dominated industries is a relevant strategy to reduce the job access gap.…”

Stage-Based Identification of Policy Effects

“…The same holds for our third application on the effects of the German reunification. For example, model-based analyses of policy effects in the context of structural transformation can be found in Rogerson (2008), who explores the role of tax increases for hours supply in the service sector, or in Duval-Hernández et al (2022), who look at female labor supply. While the mentioned macroeconomic frameworks rely on calibrated versions of their models and focus on the effects at the aggregate level, SBI provides an empirical identification of the policy effect at the regional level using cross-regional heterogeneity at the stage at which the national policy is implemented.…”