Taxation and household labor supply

Nezih Guner, Remzi Kaygusuz, Gustavo Ventura

Research output: Contribution to journalArticleScientificpeer-review

64 Citations (Scopus)

Abstract

We evaluate reforms to the U.S. tax system in a life-cycle setup with heterogeneous married and single households, and with an operative extensive margin in labor supply. We restrict our model with observations on gender and skill premia, labor force participation of married females across skill groups, children, and the structure of marital sorting. We concentrate on two revenue-neutral tax reforms: a proportional income tax and a reform in which married individuals file taxes separately (separate filing). Our findings indicate that tax reforms are accompanied by large increases in labor supply that differ across demographic groups, with the bulk of the increase coming from married females. Under a proportional income tax reform, married females account
for more than 50% of the changes in hours across steady states, while under separate filing reform, married females account for all the change in hours.
Original languageEnglish
Pages (from-to)1113-1149
Number of pages63
JournalReview of Economic Studies
Volume79
Issue number3
DOIs
Publication statusPublished - 2012
Externally publishedYes

Keywords

  • Taxation
  • Two-earner households
  • labour force participation

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