Tax and transfer policies and the female labor supply in the EU

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. This study contributes to the female labor supply responsiveness literature by measuring the effect of tax-benefit policies on female labor supply based on a broad sample of 26 European countries in 2005-2010. The tax-benefit microsimulation model EUROMOD is used to calculate a measure of work incentives at the extensive margin -the participation tax rate, which is then used as the main explanatory variable in a female employment equation. This allows me to deal with the endogeneity of income in a new way by using a simulated instrumental variable based on a fixed EU-wide sample of women. Results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2 percentage points. The effect is higher for single mothers, for women in the middle of the skills distribution, and in countries that have lower rates of female employment.JEL Classification: C25, H24, H31, J22

Drivers of Participation Elasticities across Europe: Gender or Earner Role within the Household?

“…As such, we assume that a change in one partner's labor supply behavior, i.e., giving up or taking up a job, does not simultaneously trigger a compensating labor supply reaction by other household members or changes in household income from other non-labor sources. This assumption reflects standard procedure in the PTR literature (see, e.g., 2007;Jäntti et al;2015).…”

“…However, it is unclear whether results obtained in a very particular quasi-experimental study of a specific reform yield externally valid results for general application (Goolsbee;1999;Meghir and Phillips;2010). Much smaller within-period micro-elasticities are found in two studies using an instrumental variables (IV) approach to estimate participation elasticities across countries (Jäntti et al;2015;Kalísková;2015). Building upon these studies, we establish exogeneity through a Group IV that instruments the individual-1 An early and often cited example is Eissa and Liebman (1996), who exploit the 1986 introduction of the Earned Income Tax Credit (EITC) in the US in to estimate the labor market response of lone mothers at the intensive and extensive margin.…”

“…This strategy enables us to investigate participation elasticities across European countries and sociodemographic groups, such as gender and earner roles within the household. We use the same instrument as Jäntti et al (2015), but different from Kalísková (2015), who employs a simulated IV approach for a pooled EU-wide sample of women. In contrast to Jäntti et al (2015), who use averages from similar household types to approximate PTRs on the basis of the Luxembourg Income Study data, we use the microsimulation model EUROMOD in order to calculate taxes, social security contributions and benefits for every individual in both potential working states, in work and out of work.…”

“…2 EU cross-country studies estimating PTRs based on the tax-benefit simulation model EURO-MOD for the year 1998 include Immervoll et al (2007), Immervoll et al (2011) andO'Donoghue (2011). Kalísková (2015) uses EUROMOD data covering 2005-2010 to estimate PTRs for women. Several country studies evaluate PTRs over time: Dockery et al (2011) for Australia, Collado (2018) for Belgium, Adam et al (2006) and Brewer et al (2008) for UK, Pirttillä and Selin (2011) and Bastani et al (2017) for Sweden, as well as Bartels and Pestel (2016) for Germany.…”

Copula-Based Random Effects Models for Clustered Data

“…the β and ξ j for j = 1, ..., 4, were centered around their true values. Results available upon request.23 Other papers that have used the EU-SILC dataset to study labor supply are Bredtmann et al(2014),Kalíšková (2015), and Schlenker(2015), though their approaches are different from the discrete choice model presented in this paper.…”