Taxation and Household Labour Supply

Author： Guner Nezih Kaygusuz Remzi Ventura Gustavo

ISSN： 0034-6527

Source： The Review of Economic Studies, Vol.79, Iss.3, 2012-07, pp. : 1113-1149

Disclaimer: Any content in publications that violate the sovereignty, the constitution or regulations of the PRC is not accepted or approved by CNPIEC.

Previous Menu Next

Abstract

We evaluate reforms to the U.S. tax system in a life cycle set-up with heterogeneous married and single households and with an operative extensive margin in labour supply. We restrict our model with observations on gender and skill premia, labour-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 labour 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.