Taxes and the labor market participation of married couples: the earned income tax credit

Eissa, Nada; Hoynes, Hilary

doi:10.1016/j.jpubeco.2003.09.005

“…We find that the response of women to the marginal net-of-income-tax rate is entirely driven by those in couples. This finding is in line with the tax credit literature, which documents strong evidence of negative employment effects among working wives in low-income families where both adults work (Blundell et alii (2000) for the UK, Eissa and Hoynes (2004) Notes: standard errors are in round brackets and p-values in square brackets. * denotes significance at 10%, ** significance at 5% and *** significance at 1%.…”

Section: Vi3 Heterogeneous Effectssupporting

confidence: 83%

Labor income responds differently to income-tax and payroll-tax reforms

Lehmann

¹

,

Marical

²

,

Rioux

³

2013

Journal of Public Economics

View full text Add to dashboard Cite

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. We estimate the responses of gross labor income with respect to marginal and average net-oftax rates in France over the period [2003][2004][2005][2006]. We exploit a series of reforms to the incometax and payroll-tax schedules affecting individuals who earn less than twice the minimum wage. Our estimate for the elasticity of gross labor income with respect to the marginal netof-income-tax rate is around 0.2, while we find no response to the marginal net-of-payroll-tax rate. The elasticity with respect to the average net-of-tax rate is not significant for the incometax schedule, while it is close to -1 for the payroll-tax schedule. A plausible explanation is the existence of significant labor supply responses to the income-tax schedule, combined with sticky posted wages (i.e., the gross labor income minus payroll taxes divided by hours worked). Finally, the effect of the net-of-income-tax rate seems to be driven by participation decisions, in particular those of married women. Terms of use: Documents inJEL-Code: H240, H310, J220, J380.

show abstract

“…In-work tax credit are often found to have stimulating effects on the labor force participation decision of women (e.g. Aaberge and Flood, 2008;Eissa and Hoynes, 2004;Eissa and Liebman, 1996;and Meyer and Rosenbaum, 2001). If indeed this shift was the key element of the tax reform, the impact of the reform might be different for women with partner's with high and low income.…”

Section: Parameter Estimatesmentioning

confidence: 99%

“…A more recent literature focusses on the importance of financial incentives, such as earned income tax credits, on labor force participation decisions (e.g. Eissa and Hoynes, 2004). We contribute to this literature by investigating the effects of a very substantial Dutch Tax reform in 2001.…”

Section: Introductionmentioning

confidence: 99%

“…However, we study a much shorter time period with a substantial tax reform rather than a series of tax modifications. Tax reforms provide ideal natural experiments to study the effect of financial incentives on female labor supply (see Blundell and MaCurdy, 1999;Eissa, 1995;and Eissa and Hoynes, 2004). Because the tax reform generates exogenous variation in after-tax wages, it allows us to deal with the simultaneity of working hours and after-tax wages.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Analyzing female labor supply — Evidence from a Dutch tax reform

Bösch

¹

,

Klaauw

²

2012

View full text Add to dashboard Cite

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. ABSTRACT Analyzing Female Labor Supply: Evidence from a Dutch Tax ReformAmong OECD countries, the Netherlands has average female labor force participation, but by far the highest rate of part-time work. This paper investigates the extent to which married women respond to financial incentives. We exploit the exogenous variation caused by a substantial Dutch tax reform in 2001. Our main conclusion is that the positive significant effect of tax reform on labor force participation dominates the negative insignificant effect on working hours. Our preferred explanation is that women respond more to changes in tax allowances than to changes in marginal tax rates. JEL Classification:H24, J22, J38

show abstract

“…Furthermore, they crucially a¤ect the optimal design of tax systems (see, e.g., Saez (2001), Immervoll et al (2007) and Blundell et al (2009)). The elasticities are usually derived using some sort of (structural or reduced form) labor supply model (see, e.g., Aaberge et al (1995Aaberge et al ( , 1999Aaberge et al ( , 2000, Hoynes (1996), Eissa and Hoynes (2004) and Heim (2007Heim ( , 2009). All these studies have in common that they focus only on the supply side implicitly assuming perfectly elastic labor demand.…”

Section: Introductionmentioning

confidence: 99%

Accounting for labor demand effects in structural labor supply models

Peichl

¹

,

Siegloch

²

2012

View full text Add to dashboard Cite

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.IZA Discussion Paper No. 5350 November 2010 ABSTRACT Accounting for Labor Demand Effects in Structural Labor Supply Models *When assessing the effects of policy reforms on the labor market, most studies only focus on labor supply. The interaction of supply and demand side is not explicitly modeled, which might lead to biased estimates of potential labor market outcomes. This paper proposes a straightforward method to remedy this shortcoming. We use information on firms' labor demand behavior and feed them into a structural labor supply model, completing the partial analysis of the labor market on the microdata level. We show the performance and relevance of our extension by introducing a pure labor supply side reform, the workfare concept, in Germany and simulating the labor market outcome of the reform. We find that demand effects offset about 25 percent of the positive labor supply effect of the policy reform.JEL Classification: J22, J23, J68

show abstract

Taxes and the labor market participation of married couples: the earned income tax credit

Cited by 489 publications

References 11 publications

Labor income responds differently to income-tax and payroll-tax reforms

Labor income responds differently to income-tax and payroll-tax reforms

Analyzing female labor supply — Evidence from a Dutch tax reform

Accounting for labor demand effects in structural labor supply models

Contact Info

Product

Resources

About