Article

Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988*

Authors:
To read the full-text of this research, you can request a copy directly from the authors.

Abstract

The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non-refundable tax credit. This reduced the'jointness'of the tax system: after the reform, secondary earners'effective'first dollar'marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective'first dollar'marginal tax rates faced by women with high-income husbands were particularly reduced. Using difference-indifference estimators, we find a significant increase in labour force participation among women married to higher-income husbands. Copyright 2007 Institute for Fiscal Studies.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the authors.

... Moreover, Crossley and Jeon (2007) analyze the effects of the 1988 federal income tax reform in Canada. This reform reduced the 'jointness' of the tax system. ...
... Taking this information into account we consider groups of 15 percentiles, the same range as selected by Crossley and Jeon (2007). However, this is just an initial approach, which we will return to later in Step 3. In this way we end up with 85 groups, each of them made up of 14,220 married couples. ...
... The treatment group clearly benefited from the Tax Reform, and we expect they will enter the labor market more intensively in comparison with the control group. It must be noted that the profile of the treatment and control groups differs greatly from those outlined in other papers, such as Eissa (1995), Crossley and Jeon (2007), and Selin (2014). The 1988 Spanish tax reform produces some rather different effects. ...
Article
Full-text available
Up to 1987 the Spanish Income Tax imposed compulsory joint filing for married couples. However, the 1988 reform allowed spouses to choose between joint and separate taxation, involving a reduction in tax rates for secondary earners. Our aim is to analyze this reform as a quasi-natural experiment, assessing the effects of tax changes on labor participation. To find out the causal effect we adopt the difference-in-differences technique. We use data from the ‘Spanish Income Tax Panel 1982–1998’. Our results show that, as a consequence of differential tax changes, married women in families more strongly affected by the fiscal reform increase their labor participation more than secondary earners from families less affected by the reform. The participation rate for secondary earners in the treatment group increases by 9.4 percentage points whereas the control group increases their participation rate by 7.8 percentage points. We define the treatment group as those secondary earners in relatively low-income families in year 1987 and the control group as those in middle-high income families, because the former experiences a stronger reduction in tax rates than the latter. As a result, we can attribute the 1.6-percentage-point-increase in participation rates to the 1988 income tax reform.
... The best available evidence is generally based on audit studies, in which job applications of men and women are matched on a range of worker characteristics, with the only difference visible to the potential employer being the gender of the applicant. These studies generally show that women with otherwise identical resumes are less likely to be hired and are offered lower wages (Moss-Racusin et al., 2012 [21]; Correll, Benard and Paik, 2007 [22]; Neumark, Bank and Van Nort, 1996 [23]; Reuben, Sapienza and Zingales, 2014 [24]). 5 Gender-based discrimination may reflect employers' dislike of female employees or unconscious biases (taste-based discrimination); 6 employers' perception that women are on average less productive than men (statistical discrimination); 7 or women's relatively inelastic labour supply compared to men, which allows employers to "mark down" their wages (monopsonistic discrimination). ...
... 14-19 to 20-29) weighted by the first-child fertility rate in the second age bracket (e.g. [20][21][22][23][24][25][26][27][28][29], where the choice of age brackets is dictated by availability in the Eurostat Structure of Earnings Survey. 14 The intuition is that 11 In cross-sectional data, age-specific gender wage gaps are indistinguishable from cohort-specific gaps since age and date of birth are perfectly collinear. ...
... The large share of compensating differentials in Northern and Western European countries is driven by the steep increase in the gender wage gap when moving from age 14-19 to 20-29, while the low contribution of slow human capital accumulation among Central and Eastern European countries reflects the V-shaped evolution of the gender wage gap over the life-cycle. 22 Differences in the contribution of social norms and discrimination across the three country groups (large in Central and Eastern Europe, average in Southern Europe and small in Northern and Western Europe) follow from differences in the prechildbirth gender wage gap (measured as the gap among the 14-19 age group), which the life-cycle accounting approach attributes entirely to social norms and discrimination against women. ...
Preprint
Full-text available
Despite changes in social norms and policies, on average across 25 European countries, there remains a gap of around 15% in hourly earnings between similarly-qualified men and women. This raises inequality and limits growth by preventing women from reaching their full labour market potential. Using individual-level data, this paper quantifies the main drivers of gender wage gaps with a view to devising effective policies to reduce them. The findings suggest that, on average, “sticky floors” related to social norms, gender stereotyping and discrimination account for 40% of the gender wage gap, while the “glass ceiling” related to the motherhood penalty accounts for around 60%. The importance of the “glass ceiling” is especially large in most Northern and Western European countries, while “sticky floors” explain the major part of the gap in most Central and Eastern European countries. These results imply that most Northern and Western European countries need to prioritise policies to address the motherhood penalty, such as further promoting flexitime and telework and supporting early childcare. Most Central and Eastern European as well as Southern European countries, where “sticky floors” are more important, additionally need to prioritise equal pay and pay transparency laws, measures to address gender stereotyping, competition in product markets, as well as higher wage floors where they are currently low.
... Thus the effect of the reform was to significantly reduce the "first dollar" marginal tax rate of women married to high-income husbands, while leaving the "first dollar" marginal tax rate of women married to lower income husbands essentially unchanged. Crossley and Jeon (2007) exploit this change in a difference-in-difference framework to study the effects of taxes on the labor supply of married women. They use data from the Canadian Survey of Consumer Finances (SCF) for the years from 1986 to 1991 3 and focus on low education women (because these women are most likely to be secondary earners.) ...
... Crossley and Jeon report that low education women married to higher income husbands significantly increased their labor force participation (particularly part-time participation) as a result of the Canadian federal tax reform in 1988. 4 We have used the methods and data of Crossley and Jeon (2007) to study the effect of the 1988 tax reform on the capital income reported by low education married women and their husbands. 5 The idea is that for some of these women (those married to high earning husbands) there was a significant decrease in their 'first dollar' effective marginal tax rate, whether that dollar was labor income or capital income. ...
... 3 The Canadian SCF is quite similar to the US March supplement to the CPS. 4 The estimated effect on participation rates is sizeable: 9 to 10 percentage points. 5 An interested reader can find further details on the tax reform, data and methods in Crossley and Jeon (2007). ...
Article
Identifying the effect of differential taxation on portfolio allocation requires exogenous variation in marginal tax rates. Marginal tax rates vary with income, but income surely affects portfolio choice directly. In systems of individual taxation – like Canada's – couples with the same household income can face different effective tax rates on capital income when labor income is distributed differently within households. Using this source of variation we find portfolio responses to taxation among more affluent households. The estimated effects are statistically significant but economically modest. In a “placebo” test, using data from the U.S. (which has joint taxation), we find no effect of the intra-household distribution of labor income on portfolios.
... When investigating how to deal with the heavy fiscal burden on societies due to a reduced capacity to raise government revenue and increasing social insurance expenditure on pensions, health care, etc., most research has focused either on fertility rates (Chamie, 2004; Grant et al., 2004; Kohler et al., 2006) or the LFP among elderly workers (Wise, 1997; Lumsdaine and Mitchell, 1999). The untapped work potential of mothers, however, has been largely neglected in this debate (except for the impact of marginal taxes on female LFP, Blundell et al., 1998; Crossley, 2007; LaLumia, 2008). ...
... When investigating how to deal with the heavy fiscal burden on societies due to a reduced capacity to raise government revenue and increasing social insurance expenditure on pensions, health care, etc., most research has focused either on fertility rates (Chamie, 2004; Grant et al., 2004; Kohler et al., 2006) or the LFP among elderly workers (Wise, 1997; Lumsdaine and Mitchell, 1999). The untapped work potential of mothers, however, has been largely neglected in this debate (except for the impact of marginal taxes on female LFP, Blundell et al., 1998; Crossley, 2007; LaLumia, 2008). Given the striking difference between the LFP of childless women and mothers, in particular mothers with young children, one important policy question remains: how can we encourage young mothers to increase their labor supply? ...
Article
How can we encourage untapped work potentials, such as young mothers, to participate in the labor market? The present study addresses this issue by providing a direct measure for the relevance of job-related amenities for mothers work decision, namely mothers’ marginal willingness to pay (MWP) for job amenities. Its identification strategy relies on German maternity leave length data. Using data from the German Socio-Economic Panel and the Qualification and Career Survey, mothers' leave length decision is estimated by a discrete duration method that assumes a logistic hazard function. The MWP for amenities can be inferred through the estimated elasticities of the leave length with respect to the disamenities and the wage. The results provide evidence that mothers are willing to sacrifice a significant fraction of their wage to reduce hazardous working conditions (more than 20%) and to enjoy a working schedule compatible with available daycare (more than 35%).
... Tal y como apuntanCrossley y Jeon (2007), este puede que no sea el modelo correcto para estudiar una función de oferta de trabajo de una familia. Siguiendo su planteamiento consideramos que esta simplificación es apropiada cuando nuestro objetivo también es analizar los efectos del cambio de impuestos sobre la oferta de trabajo de mujeres casadas. ...
... Crossley y Jeon (2007) excluyen del grupo base del estudio a las mujeres con niveles educativos altos, porque pueden ser las menos sensibles a cambios impositivos. Desafortunadamente nuestros datos nos impiden realizar esta selección, con lo que tenemos que tomar todos los individuos sea cual sea su nivel educativo. ...
Conference Paper
Full-text available
El análisis de los efectos de cambios en el sistema fiscal, especialmente del impuesto sobre la renta, sobre la oferta de trabajo de las mujeres casadas constituye un tema de elevado interés dentro de la literatura económica y desde el punto de vista de la política económica. Hasta 1987 el IRPF español era un impuesto de declaración
... In Kanada hat eine Steuerreform in Richtung mehr Individualbesteuerung zu einem Partizi-pationse↵ekt von verheirateten Frauen von 9 bis 10 Prozentpunkten geführt (Crossley und Jeon, 2007). Eines der wenigen Beispiele für die Einführung einer gemeinsamen Veranlagung bietet Tschechien. ...
Article
Full-text available
Ökonomische Anreize in der Familienpolitik spielen eine wichtige Rolle für das Potenzialwachstum, vor allem vor dem Hintergrund des demografischen Wandels und familienpolitischer Maß-nahmen, die sich auf die Produktivität und das Erwerbsangebot auswirken können. Hierbei steht die Frage im Mittelpunkt, wie sich familienpolitische Leistungen auf die ökonomische Zielsetzung auswirken, das Erwerbsangebot von Zweitverdienenden-die oftmals Frauen sind-zu erhöhen. In diesem Beitrag werden vor dem Hintergrund dieser Zielsetzung etwaige Fehlanreize im deutschen Steuer-, Abgaben-und Transfersystem sowie verschiedene Reformansätze diskutiert. Darunter fallen steuerliche Leistungen, wie das Ehegattensplitting, Leistungen der Sozialversicherungen, wie die beitragsfreie Mitversicherung von Ehepartnern, monetäre Transfers, wie das Kindergeld und Realtransfers, etwa durch subventionierte Kinderbetreuungsangebote. Dabei identifizieren wir zentrale Bausteine beim Übergang zu einem integrierten und ganzheitlichen System aus Steuern, Transfers und Sozialabgaben, bei dem sich einzelne Maßnahmen nicht konterkarieren, sondern gemeinsam in Richtung einer Ausweitung des Erwerbsangebots von Zweitverdienenden wirken.
... Apparently, it is crucial to account for this latter source of variation in the estimations. In fact, related studies carried out in difference-indifference settings (Eissa (1995Eissa ( ,1996), Crossley and Jeon (2007) and LaLumia (2008)), have been unable to disentangle these two sources of variation. ...
Article
Full-text available
Sweden reached the 2007 OECD average level of female labor force participation already in 1974. Before, but not after, 1971 the average tax rate facing the housewife was a function of the income of her husband. By exploiting a rich register based data source I utilize the exogenous variation provided by the individual tax reform to analyze the evolution of female employment in Sweden in the beginning of the 1970’s. Simulations suggest that employment among married women would have been 10 percentage points lower in 1975 if the 1969 statutory income tax system still had been in place in 1975.
... In a quantitative model, they find that going from joint to individual taxation would increase the labor supply of married women substantially. Some microeconomic studies analyze the effect of tax reforms involving a transition from joint to individual taxation in a difference-in-differences approach (Crossley and Jeon (2007), Eissa (1995) and Eissa (1996)), concluding that such a tax reform increases labor supply of wives of well-earning husbands. Kaygusuz (2010) evaluates the effects of tax reforms favoring married women in the US with a quantitative model. ...
Article
We document contemporaneous differences in the aggregate labor supply of married couples across 19 OECD countries. We quantify the contribution of international differences in non-linear labor income taxes and consumption taxes, as well as male and female wages, to the international differences in the data. Our model replicates the comparatively small differences of married men's hours worked very well. Moreover, taxes and wages account for a large part of the observed substantial differences in married women's labor supply between the US and Western, Eastern, and Northern Europe, but cannot explain the low labor supply of married women in Southern Europe.
... It incorporates individual income capabilities by relieving taxes for the spouse who is in the workforce while the other is at home, working less and/or earning less. However, it supports a breadwinner model since in such a system taxes are applied on the split total earnings of married couples, which under a progressive tax function results in lower marginal tax rates for the primary earner and higher for the secondary earner. 2 LaLumia (2008), Crossley & Jeon (2007), and Selin (2014) use natural experiments in the United States (change from individual to joint taxation), Canada, and Sweden (joint to individual taxation), respectively, showing that the system of joint taxation is associated with a lower labor force participation of married women since it is mostly women who are in the role of secondary earners and, therefore, face disincentives to (increase) labor market work. For Germany, which still adheres to a system of joint taxation, microsimulation studies predict an increase in married women's labor supply if individual taxation is introduced (Bach et al., 2011;Beninger et al., 2007;Steiner & Wrohlich, 2004). ...
... Since such jointness affects the incentives to work for family members, several studies have examined its effects in different countries. Examples include studies on tax reforms in Ireland (Callan et al. 2009), Canada (Crossley and Jeon 2007), Belgium (Ghysels et al. 2011), and the UK (Stephens and Ward-Batts 2004). Japan is no exception. ...
Article
Full-text available
This study explores the effects of spousal allowances (SAs) in the Japanese system of personal income taxes, using the micro-simulation method based on the discrete choice model of labor supply. Our simulations show that the complete abolishment of SAs would increase the average annual working hours of all wives by 1.6% only, which is smaller than previous findings in the Japanese literature. If we focus on households benefiting from SAs, the rate of increase in the wife’s working hours is even smaller (.1%). In addition, one particular case of SA reduction leads to a decrease in the labor supply of wives. We argue that these unexpected results are due to our explicit consideration of the fixed cost of labor market participations, which has been previously ignored in the Japanese studies.
... Ex-post micro-econometric evaluations offer convincing evidence for positive employment effects from individualizing the PIT. These studies have been conducted, for instance, for the Czech Republic, Canada, Sweden and the US (see, respectively, Kaliskova, 2014;Crossley and Sung-Hee, 2007;Selin, 2014;and Lalumia, 2008). In 2001, the Netherlands undertook a major PIT reform whereby the basic tax deduction of a non-working spouse could no longer be transferred to the breadwinner-an important step towards full individualization. ...
Article
Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
... More specifically, the design of couples' income taxation strongly influences partners' labor supply decisions. While individual taxation encourages labor market participation, joint taxation encourages specialisation within the household since the marginal tax rate of the secondary earner depends on that of the primary earner (Crossley and Jeon, 2007). A majority of developed countries has implemented an individual income tax scheme (Care, 2014), although France in particular implements taxation at the household level. ...
Article
Full-text available
This paper analyzes assortative mating and its contribution to inequality in France. We first provide descriptive evidence on the statistical association in several socio‐economic attributes of partners. Second, we assess the contribution of assortative mating to earnings inequality between couples. We provide a new method for assessing the contribution of assortative mating to inequality in couple’s potential earnings, that accounts for selection bias arising from labor force participation. Our results indicate a strong degree of assortative mating in France. The correlation in earnings is around 0.17 for annual earnings, around 0.35 for full‐time equivalent earnings and up to 0.49 when using multi‐year average earnings. Assortative mating tends to increase inequality among couples. For annual earnings, the effect accounts for 3 to 9 percent of measured inequality. The effect of assortative mating on household potential earnings is much larger and amounts to 10 to 20 percent for observed inequality.
... Our target group 1 is the set of working women (aged 18-60), neither receiving pensions nor self-employed-that is, all the women with real availability to work. We focus on female labor supply as the literature has found it much more elastic than that of males (Crossley and Jeon 2007;Lalumia 2008;Selin 2014;Blundell et al. 2016). ...
Article
Full-text available
Tax benefits targeted to low-wage workers have become very common transfer programs that seek to meet both efficiency and equity targets. An expanding literature has assessed the effects of these policies on income distribution and labor supply showing important implications for female labor participation. In this paper, we estimate the distributional and behavioral impacts of a simulated new benefit in Spain based on the replacement of the existing working mother tax credit (WMTC) using as a reference the US Earned Income Tax Credit (EITC). We simulate the effects of the proposed scheme using EUROMOD and a discrete choice model of labor supply. Our results show that the enhancement of the proposed reform would have significant and positive effects both in terms of female labor participation and inequality and poverty reduction. The introduction of this benefit would generate a substantial increase in labor participation at the extensive margin and a non-negligible reduction at the intensive margin.
... With regressive tax rates at least high-income couples may benefit from marriage, and the discrimination of marriage vanishes completely with the introduction of the uniform flat rate tax in 2008. That second earners respond strongly to taxation is a channel which has found to be important in the literature on labor supply and taxation (Meghir and Phillips, 2010;Crossley and Jeon, 2007;Eissa and Hoynes, 2004). The adoption of a flat rate tax in 2008 therefore bears potential for positive labor supply effects of second earners, i.e., traditionally women. ...
Preprint
Full-text available
Published in: Steuer und Wirtschaft, 2/2021, S. 148 - 161. Die vorliegende Arbeit soll einen Beitrag zur Klärung der Frage leisten, ob das Ehegattensplitting, wie in vielen Arbeiten behauptet, einen negativen Einfluss auf das Arbeitsverhalten verheirateter Frauen hat. Hierzu wird für Deutschland erstmals ein quasi-experimenteller Ansatz gewählt, bei dem anhand des allgemeinen Effekts der Heirat auf das Erwerbsverhalten der heiratenden Frauen die Wirkung des Ehegattensplittings identifiziert wird. Die Veränderung des Arbeitsverhaltens heiratender Frauen wird dabei der Veränderung bei jenen Frauen gegenübergestellt, die im gleichen Zeitraum weiterhin mit ihrem festen Partner zusammenleben, ohne zu heiraten (Kontrollgruppe). Die Ergebnisse sprechen eindeutig gegen einen unmittelbaren negativen Effekt des Ehegattensplittings auf das Erwerbsverhalten von Frauen. Jedoch reduzieren heiratende und zeitgleich ein Kind bekommende Frauen ihre Erwerbstätigkeit stärker als gebärende Frauen in der Kontrollgruppe.
Article
Purpose – Given the importance of legal parity between women and men in today's world and lack of research in this domain, the purpose of this paper is to identify gender-based distinctions in formal laws and institutions that may directly or indirectly affect women's prospects as entrepreneurs and employees. Design/methodology/approach – Covering 128 economies, it establishes six indicators of gender differences in formal laws and institutions: accessing institutions; using property; getting a job; dealing with taxes; building credit; and going to court. The first three indicators capture laws that have direct gender dimensions and are based on a reading of such laws from the perspective of individual women. The fourth indicator examines the direct and indirect gender implications of tax policy from the perspective of four standardised families with varying tax liabilities. The last two indicators examine the ease of access to credit bureaus and courts to examine the indirect effects that microfinance institutions and dispute resolution have on women, who are more likely to rely on non-traditional financial services. The questions used to construct each indicator were chosen based on data availability, economic relevance and variation of regulation across economies. Findings – The findings of the study pointed out that every region contains economies with unequal rules for men and women, with the extent of inequality varying by region. Research limitations/implications – This research does not test or analyse outcome variables of gender inequality; it simply identifies whether the law is equal for women and men, which can be a potential source of inequitable gender outcomes. Practical implications – This research offers valuable practical insights for employees and entrepreneurs to improve understanding of how legal and regulatory environments shape opportunities for women and contribute to more informed policy discussions. Originality/value – The paper provides interesting insights into research on linkages between legal differentiation and outcomes for women, and helps inform policy dialogue on things governments can do to expand women's opportunities. It is the first attempt to measure the gender gap in policy variables using quantitative and objective data.
Article
This paper exploits area-based piloting and age-related eligibility rules to identify treatment effects of a labor market program-the New Deal for Young People in the U.K. A central focus is on substitution/displacement effects and on equilibrium wage effects. The program includes extensive job assistance and wage subsidies to employers. We find that the impact of the program significantly raised transitions to employment by about 5 percentage points. The impact is robust to a wide variety of nonexperimental estimators. However, we present some evidence that this effect may not be as large in the longer run. (JEL: J18, J23, J38) Copyright (c) 2004 The European Economic Association.
Article
Full-text available
This paper combines both micro and macro approaches to identify the drivers of (un)employment and inactivity in Luxembourg. The young, low-skilled, and non-EU migrants are found to be the most vulnerable groups in the labor market. In addition to skills mismatches, work disincentives embedded in the tax-benefit system constitute a factor explaining structural unemployment. High unemployment of young and low-skilled workers reflects substantial unemployment traps, while disincentives for second earners (respectively the generosity of the pension system) contribute to lower labor market participation of women (respectively seniors). Further reduction of structural unemployment requires better integration of vulnerable groups into the labor market and improved targeting of benefits to make work more rewarding.
Article
Abstract Income splitting for tax purposes results in more specialization of wives, but does this in turn generate more gender inequality? In my dynamic bargaining model with a divorce threatpoint, I find that who controls the couple's labour supply plays a crucial role in establishing this link. If spouses choose their labour supply non-cooperatively, only the husband's increase – but not her own decrease – in labour supply introduces a negative term in the wife's change in welfare. If the wife does not control her own labour supply, a decrease in her own labour supply introduces an additional negative term. La fragmentation du revenu aux fins d'impôt résulte en une plus grande spécialisation des épouses, mais est-ce que cela engendre davantage d'inégalité entre genres? Dans un modèle de marchandage dynamique avec menace de divorce à la clé, on découvre que la personne qui contrôle l'offre de travail du couple joue un rôle crucial dans la réponse à cette question. Si les époux choisissent leurs offres de travail de manière non-coopérative, seul l'accroissement de l'offre de travail de l'époux (et non le déclin de l'offre de travail de l'épouse) introduit un terme négatif dans le changement de niveau de bien-être de l'épouse. Si l'épouse ne contrôle pas sa propre offre de travail, un déclin dans son offre de travail introduit un élément négatif additionnel.
Article
The issue of same-sex marriage legalization is increasingly part of the national political dialogue. This legalization would have a number of economic impacts, one of the most direct being a change in income tax payments, through the so-called marriage penalty. I estimate the effects of same-sex marriage legalization on federal income tax revenue. These estimates rely critically on the responsiveness of labor supply and marital choice to changes in the tax code. I present new evidence on both topics using changes in taxation generated from the 2003 Jobs and Growth Tax Relief Reconciliation Act. In addition, I propose a novel measure of the marriage penalty that incorporates the fact that agents will respond optimally to changes in marginal tax rates within the household.
Article
Since 1997, Labour has redistributed welfare spending to caregivers, especially parents. Two primary aims of this policy were getting more mothers into paid work and reducing child poverty. But the implications are more complicated than this. All households with children have gained, and especially those on low and middle incomes. But lone parents and mothers and fathers in couple households have each been affected differently. Defining what constitutes ‘money for care’ is a prerequisite for normative discussion on how the social costs of caregiving should be shared between and within households.
Data
Full-text available
Resumen En este trabajo analizamos las consecuencias de la eliminación de la tributación conjunta opcional, presente en el IRPF actual. Para ello en primer lugar describimos el impuesto español, analizando las características de las unidades familiares que tributan conjuntamente. En segundo lugar realizamos varios ejercicios de microsimulación de un impuesto individual universal, introduciendo dos alternativas a la situación actual: una reducción de los tipos impositivos y una deducción en la cuota. Para evaluar estas propuestas calculamos los índices de desigualdad, progresividad y redistribución. En tercer lugar, para analizar la sensibilidad de estos índices a distintas escalas de equivalencia, introducimos una nueva escala subjetiva utilizando la opinión de los individuos de la muestra. Con la nueva escala, la reforma de la deducción en la cuota genera resultados muy similares al impuesto actual. Abstract In this paper, our aim is to analyse the impact of eliminating the joint filing option within the present Spanish income tax system, in favour of implementing a more universal individual scheme. Firstly, we explore the present income tax system in Spain, paying particular attention to those families who choose to file joint tax returns. Secondly, we introduce an individual income tax, undertaking several micro simulation exercises. We explore two possible proposals: a reduction in tax rates and a tax credit. To assess these reforms we calculate the inequality, progressivity and distributive indexes respectively.
Article
Résumé:Un changement dans les politiques familiales entraîne typiquement des changements dans les perspectives d'avenir économique d'un couple, menant ainsi à des actions différentes avant et après le changement de politique. La question centrale que pose le présent article consiste à savoir comment ces différentes actions (et plus précisément un changement dans le partage des tâches) se traduisent en modification du bien-être de chaque conjoint (de fait) ou, en termes plus économiques, de leur utilité. Afin d'évaluer l'utilité de chaque conjoint avant et après les changements de politique, l'article s'inspire de la théorie sur la négociation coopérative pour examiner comment les conjoints se partagent les ressources familiales. Cette analyse révèle qu 'un changement dans le partage des tâches des conjoints attribuable à un changement de politiques ne modifie pas le pouvoir de négociation des conjoints suivant un modèle de négociation d'une seule phase, mais qu 'il y a modification suivant un modèle de négociation dynamique de phase-par-phase.:A change in family policies typically changes a couple's economic opportunities, leading to different actions before and after the policy change. The central question in this article is how these different actions (most notably a change in the division of labour) translate into changes in each (common-law) spouse's well-being or, in more economic terms, utility. In order to evaluate the utility of each spouse before and after the policy changes, the article draws on cooperative bargaining theory to examine how husband and wife share family resources. It shows that a change in spouses' division of labour due to a policy change does not change the bargaining power of the spouses in a one-period bargaining model but that it does so in a dynamic period-by-period bargaining model.
Article
I examine the effect of marriage penalties in the US income tax system on marital status. I construct a simulated instrument that exploits variation in the tax code over time and between US states to deal with potential endogeneity between the marriage penalty a couple faces and their marital status. I find that a $1000 increase in the marriage penalty faced reduces the probability of marriage by 1.7 percentage points, an effect four times larger than previously estimated. Those in the lowest education groups respond by as much as 2.7 percentage points, with the average response declining as education increases.
Article
This paper analyzes the effects of family policy on the number of children. A natural experiment which changed regional family policy dramatically was Saarland's reaccession to Germany in 1957. Prior to this date, Saarland was part of France. After 1957, families in Saarland were subject to spouse income splitting instead of the previous family income splitting and other aspects of family policy also changed fundamentally with Saarland's reaccession to Germany. We identify the causal impact of this change by using panel data on newborn children in 45 municipalities in Saarland, and 350 municipalities in surrounding regions in Germany and France. The results suggest that the change in family policy associated with Saarland's reaccession to Germany led to a reduction of births by about one-fifth.
Article
There is an extensive literature suggesting that marriage confers benefits to both men and women in the form of increased earnings, better health and a longer life. Yet, where the focus is on health, most of this work has centered on one or two measures of health outcomes or on certain health behaviors such as smoking or alcohol use and has often failed to include those who cohabit as a separate relationship status. In this paper, we extend the research on the links between health and relationship status in three important ways. First, we consider a wide array of health indicators including self-reported health, chronic conditions, physical limitations, a measure of mental health, body mass index (BMI), and a number of health-related behaviors. Second, we use data from eight waves of the Canadian National Public Health Survey between 1994 and 2008 which allows us to estimate the effect of relationship status on health in a setting in which health insurance is not dependent on marriage. Third, we incorporate cohabitation as a separate relationship status. After controlling for time-invariant factors related to selection into and out of marriage, we find that marriage confers health benefits in the form of improved mental health, and lower levels of alcohol use. Marriage, however, is not without its cost. Similar to studies using U.S. data, marriage results in higher BMI, greater incidence of overweight and obesity and lower probabilities of regular exercise. These benefits and costs accrue to those who marry, and often to cohabiters.
Article
The United States personal income tax system treats married and unmarried couples differently, creating both penalties and subsidies for marriage. This paper examines the effect of these penalties and subsidies on the choice of marital status. Endogeneity between the marriage penalty a couple faces and its marital status is dealt with using a simulated instrument capturing variation in the tax code over time and between states. I find that a $1,000 change in the financial incentive for marriage has a 1.7 percentage point (1.9 per cent) effect on the probability of marriage. This effect is symmetric for subsidies and penalties and, whilst modest, is four times larger than previously estimated. Lower education groups and couples without children are the most responsive.
Article
Full-text available
In this paper, we use a microsimulation model to examine the labor supply implications of switching from joint taxation (“Ehegattensplitting”) to individual taxation. We show that the switch to individual taxation would increase labor supply by more than half a million full-time equivalents. However, such a reform also leads to financial losses for some groups of the population, which should be taken into account by economic policy makers.
Article
While joint taxation is fairly widespread across European countries, the evidence of its labor supply effects is scarce due to a lack of recent policy changes. This study makes use of the introduction of joint taxation in the Czech Republic in 2005 to estimate its effect on married couples’ labor supply. Results based on difference–in–differences and on triple differences with several alternative control groups suggest that the introduction of joint taxation lead to a decline of about 3 percentage points in the employment rate of married women with children. Participation declines are twice as large when the tax work disincentives are highest—among women with tertiary–educated husbands. The introduction of joint taxation did not affect the employment probability of married men with children.
Article
Spain and Canada were pursuing divergent political agendas before the 2007–09 global economic crisis and subsequent recession: Canada's conservative government, elected in 2006, had begun reducing the size of government by slashing revenues, while Spain's social democratic government (2004–11) aimed to increase social inclusion and gender equality. Using women's shares of market (labor and capital) incomes and after-tax incomes as equality indicators, this study analyzes the probable gender impact of each country's policies during the global economic crisis. The authors find that, although both countries were signatories to the United Nations Convention on the Elimination of All Forms of Discrimination against Women (1979; CEDAW) and the Beijing Platform for Action (1995), neither lived up to these commitments to undertake gender-based analyses when developing crisis interventions; but if Spain's policies had been maintained, they would have had less damaging effects on women in the long term than those implemented in Canada.
Article
It has been widely established that those who are married are on average healthier than unmar-ried cohabitees and those who are single. However, this is partly due to the selection of healthier individuals into marriage, and so there is no strong consensus on the causal effect of marriage. I estimate the effect of marriage, as opposed to unmarried cohabitation, on self-reported health and disability. I control for selection into marriage using variation in average marriage tax penalties. Whilst raw correlations conform to previous studies in showing a health benefit to marriage (associ-ated with a 2% decrease in the probability of reporting poor health), for men this benefit disappears when I control for selection. For women, the effect is reversed, with marriage causing a 9% increase in the probability of reporting poor health. A second contribution of this paper is to provide new estimates of the effect of marriage tax penalties on the probability of marriage versus unmarried cohabitation. Using exogenous variation in the marriage tax penalty between states and over time to control for the simultaneity of marital status and the marriage penalty, I find that a $1000 increase in the marriage penalty reduces the probability of marriage by 0.6%.
Article
Using a difference-in-differences estimator, I find the Canadian Universal Child Care Benefit has significant negative income effects on the labour supply of married individuals. The likelihood of lower-educated mothers to participate in the labour force is reduced 3.2 percentage points when receiving the benefit. Median hours worked per week among lower-educated mothers is reduced by 1.9 hours. The effects on higher-educated mothers are substantial, with median hours worked among higher-educated mothers reduced by nearly one hour per week. For men, the evidence suggests small but significant income effects on labour supply, consistent with the literature on labour supply elasticities.
Article
Purpose – The purpose of this paper is to investigate the connection between labour supply and the wages of married women of different ages in Toronto using data from the 2010 Labour Force Survey of Canada. Design/methodology/approach – The authors employ three econometric techniques, ordinary least square, 2 stage least square and the Heckman two-step method to estimate the supply elasticities. The first two focus on the wage rate and hours conditional on the subjects being employed whereas the third method controls for sample selectivity bias by including the unemployed. Bootstrap test statistics are produced when the normality assumption for the error terms is found to be violated. Findings – The aggregate labour supply elasticity for married women in Toronto is estimated to be 0.053 which similar to value found for Canada for a whole in a previous study even though Toronto is much more diverse culturally than average. The labour supply elasticities for 25-34 year old and 35-44 year old married are estimated to be 0.108 and 0.079, respectively. The supply elasticity for married women aged 45-59 is not significantly different from 0. Originality/value – The paper shows that younger married women in Toronto are more responsive to an increase in wages than older women. The estimation procedure and the testing of the significance of coefficients are more rigorous than previous studies.
Article
The Canadian government has set a high priority on reducing the economic burden of taxation. In a context of fiscal surpluses, it has been: markedly reducing corporate income and capital taxes; providing more personal tax relief especially at lower incomes and above all for saving; and cutting the federal value added tax (GST). While such measures, in particular income and capital tax cuts, reduce the economic damage caused by tax, Canada should go further along this route with significant revenue-neutral reforms to achieve a more efficient tax mix that also retains its redistributive features. Numerous tax preferences to favoured activities, firm types, investments and savings vehicles narrow the tax base and create loopholes, keeping statutory rates higher than otherwise and distorting resource allocation. They should therefore be removed. It would also help to shift the tax mix toward more user fees and indirect taxes – including VAT, environmental levies and property taxes – which do not distort inter-temporal economic choices as income taxes do. Lower corporate and personal income taxes could improve the incentives for capital formation, FDI, innovation, entrepreneurship, labour-force participation, work effort, and the pursuit of higher education. The result would be higher standards of living. Réforme fiscale au Canada pour plus d’efficience et d’équité Le gouvernement canadien s’est fixé pour priorité d’alléger la charge fiscale qui pèse sur l’économie. Dans un contexte d’excédents budgétaires, cette stratégie s’articule autour des objectifs suivants : réduire de manière significative l’impôt sur les sociétés et les impôts sur le capital ; multiplier les allégements fiscaux en faveur des particuliers, surtout ceux à bas revenus ; et abaisser la taxe fédérale sur les produits et services (TPS). Même si ces mesures, et notamment les baisses de l’impôt sur le revenu et sur le capital, atténuent les préjudices
Article
Full-text available
This article is a comparison of statutory and effective marginal tax rates in Canada. It is similar to a recent study by the Joint Committee on Taxation in the United States, except that both the personal income tax and social security programs are considered. The data source is the Social Policy Simulation Database and Model, which is a Statistics Canada database of tax information on 200,000 individuals. Nineteen separate sources of differences between effective and statutory rates are ranked in terms of their impact on effective marginal tax rates in Canada, with the benefit reduction of the guaranteed income supplement for seniors heading the list. It is found that 16.6 million Canadians, or 56 percent of the population, experience some difference between their effective and statutory marginal tax rates. More than one-fifth of the population has at least a 10-percentage-point difference. These Canadian figures are higher than those previously calculated for individual taxpayers in the United States. High effective tax rates are concentrated in the 17-percent federal statutory rate bracket; more taxpayers with effective rates above 45 percent come from this bracket than from the supposedly "top" bracket of 31.32 percent. Almost 1 million Canadians, two-thirds of whom are seniors, have an effective marginal tax rate of 60 percent or more.
Article
Full-text available
Federal tax reform in 1988 flattened the Canadian personal income tax schedule, changing the marginal tax rates for many individuals. Using methods similar to those applied by Auten and Carroll [Rev. Econ. 81(4) (1999) 681] in the study of the effects of the 1986 U.S. Tax Reform Act, we estimate the responsiveness of income to changes in taxes to be substantially smaller in Canada. However we find evidence of a much higher response in self-employment income, in the labor income of seniors and from those with high incomes.
Article
Full-text available
The participation rate of women aged 25-64 rose greatly in the 1970s and 1980s, but has stagnated in the 1990s. In principle, this development could reflect either the poor growth performance of the economy this decade or the completion of the integration of women into the labour force. In the fourth article of this symposium, Paul Beaudry and Thomas Lemieux use a cohort analysis to shed light on the explanation of this stagnation in female labour force participation. Using data from the Survey of Consumer Finances for the 1976-94 period, the authors track the participation rates over time of representative groups of women who entered the labour force at different points in time. They decompose a cohort’s participation rate into three effects: a macroeconomic effect common across cohorts linked to factors such as recessions and employment insurance generosity; an age or life-cycle effect; and a cohort-specific effect which shows the differences between cohorts for a given age and macroeconomic effect. The authors find that the cohort effects are likely the dominant factor in explaining the recent stagnation of female participation, just as it explained the large increases in the 1970s and 1980s. The recession of the early 1990s, which according to the authors reduced the female participation rate by 1 percentage point, merely amplified the stagnation phenomenon. As the cohort effects stabilize with the narrowing of the gap between male and female participation rates, the stagnation would have occurred, albeit later in the 1990s, even if more favourable macroeconomic conditions had prevailed. The authors conclude that there is still room for a 2-3 percentage point increase in the participation rate of women 25-64, but the magnitude of the increases of the 1970s and 1980s is not possible as the cohort effects that prevailed then no longer exist. The authors stress that their results are dependent on the amount of flexibility used to capture the cohort effect so that the age profile and its slope can trace both the rise and the flattening of the participation rate by age. They point out that over time participation behaviour of women 25-64 is converging toward that of men, namely, high and flat participation profiles to at least age 55. They also note that the much smaller increase in the female participation rate in the United States in the 1990s relative to the 1970s and 1980s despite the robust U.S. labour market supports their findings as the cohort effects were also levelling out south of the border.
Article
Full-text available
The 1980s tax reforms and the changing dispersion of wages offer one of the best opportunities yet to estimate labor supply effects. Nevertheless, changing sample composition, aggregate shocks, the changing composition of the tax paying population, and discontinuities in the tax system create serious identification and estimation problems. The authors develop grouping estimators that address these issues. Their results reveal positive and moderately sized wage elasticities. The authors also find negative income effects for women with children.
Article
Full-text available
This paper provides a review of the progress of women in the labour market over the last 30 years. We begin with a discussion of the theoretical underpinnings and the empirical evidence of the labour supply decisions of women. We then draw on Labour Force Survey data to examine the trends in labour force participation, and employment trends by industry and work patterns. We also draw on the Survey of Labour and Income Dynamics to examine changes in women's wages and income inequality. Our results show that the labour supply behaviour of women has increased such that it now more closely mirrors that of their male counterparts, though children remain a key defining difference. Part-time labour market participation also reflects this difference. We show that while wages have improved, a sizable earnings differential remains. Changes in women's education levels were shown to underlie many of these trends. Finally, we conclude the paper by addressing policy issues related to the trends and position of women in the labour market. We focus this discussion on social assistance, child care policies, child benefits, employment insurance, non-wage benefits, and pay and employment equity.
Article
Full-text available
Using research designs patterned after randomized experiments, many recent economic studies examine outcome measures for treatment groups and comparison groups that are not randomly assigned. By using variation in explanatory variables generated by changes in state laws, government draft mechanisms, or other means, these studies obtain variation that is readily examined and is plausibly exogenous. This article describes the advantages of these studies and suggests how they can be improved. It also provides aids in judging the validity of inferences that they draw. Design complications such as multiple treatment and comparison groups and multiple preintervention or postintervention observations are advocated.
Article
Using research designs patterned after randomized experiments, many recent economic studies examine outcome measures for treatment groups and comparison groups that are not randomly assigned. By using variation in explanatory variables generated by changes in state laws, government draft mechanisms, or other means, these studies obtain variation that is readily examined and is plausibly exogenous. This article describes the advantages of these studies and suggests how they can be improved. It also provides aids in judging the validity of inferences that they draw. Design complications such as multiple treatment and comparison groups and multiple preintervention or postintervention observations are advocated.
Article
A central tax policy parameter that has recently received much attention, but about which there is substantial uncertainty, is the overall elasticity of taxable income. We provide new estimates of this elasticity which address identification problems with previous work, by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s. This identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income, and on variation in the elasticity of taxable income by income group. We find that the overall elasticity of taxable income is approximately 0.4; the elasticity of real income, not including tax preferences, is much lower. We estimate small income effects of tax changes on reported income, implying that the compensated and uncompensated elasticities of taxable income are very similar. We estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above $100 000 per year, who have an elasticity of 0.57, while for those with incomes below $100 000 per year the elasticity is less than one-third as large. Moreover, high income taxpayers who itemize are particularly responsive to taxation. Our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers.
Article
The United States changed its tax treatment of married couples in 1948, from a system in which each spouse paid taxes on his or her own income to a system in which a married couple is taxed as a unit. The switch from separate to joint taxation changed incentives for labor supply and asset ownership. This paper investigates the effects of the conversion to joint taxation, taking advantage of a natural experiment created by cross-state variation in property laws. Married individuals in states with community property laws had always been taxed as if each spouse had earned half of the couple's income, and thus were unaffected by the 1948 legal change. Comparing the behavior of highly-educated taxpayers in affected and unaffected states indicates that the tax change is associated with a decline of approximately 2 percentage points in the employment rate of married women, consistent with the higher first-dollar tax rates they faced after 1948. Women married to self-employed men were also less likely to have non-wage income after 1948, reflecting pre-1948 allocation of family assets to wives for tax purposes. The effects of joint taxation on married men's labor force participation and non-wage income holding are generally not statistically significant.
Article
From book description: Modern labor economics has continued to grow and develop since the first volumes of this Handbook were published. The subject matter of labor economics continues to have at its core an attempt to systematically find empirical analyses that are consistent with a systematic and parsimonious theoretical understanding of the diverse phenomenon that make up the labor market. As before, many of these analyses are provocative and controversial because they are so directly relevant to both public policy and private decision making. In many ways the modern development in the field of labor economics continues to set the standards for the best work in applied economics. This volume of the Handbook has a notable representation of authors - and topics of importance - from throughout the world.
Article
Taxing Women comprises both an insightful, critical analysis of the gender biases in current tax laws and a wake-up call for all those concerned with gender justice to pay more attention to the pervasive impact of such laws. Providing real-life examples, Edward McCaffery shows how tax laws are actually written to punish married couples who file jointly. No dual-income household can afford not to read this book before filing their taxes. "Taxing Women is a must-have primer for any woman who wants to understand how our current tax system affects her family's economic condition. In plain English, McCaffery explains how the tax code stacks the deck against women and why it's in women's economic interest to lead the next great tax rebellion."—Patricia Schroeder "McCaffery is an expert on the interplay between taxes and social policy. . . . Devastating in his analysis. . . . Intriguing."—Harris Collingwood, Working Women "A wake-up call regarding the inequalities of an archaic system that actually penalizes women for working."—Publishers Weekly
Article
Typescript. Thesis (Ph.D.)--York University, 2003. Graduate Programme in Economics. Includes bibliographical references (leaves 92-95). Microfiche. System requirements for Internet version: Adobe Acrobat reader.
Article
This paper challenges the conventional wisdom that, on efficiency grounds, taxing individuals is always preferred to taxing households in a progressive income tax. The reason is that tax design affects the input of family members' time not only into market production and consumption of leisure but into household production as well. A simple numerical example is used to illustrate this possibility and a general equilibrium model calibrated to Australian data suggests that such a result can occur for actual tax structures in use. Copyright 1996 by University of Chicago Press.
Article
Research on the distribution of income during the 1980s has identified a trend towards increasing inequality, which may be the continuation and acceleration of trends spanning several decades. This paper explores to what extent behavioral responses to the tax changes during the 1980s may also explain the rising inequality. The 1986 Tax Reform Act is used as a natural experiment to explore the roles played by both taxes and a variety of nontax factors. Our principal finding is that both tax rates and nontax factors appear to have had significant effects on relative income growth during the late 1980s. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
Article
This paper exploits area-based piloting and age-related eligibility rules to identify treatment effects of a labor market program-the New Deal for Young People in the U.K. A central focus is on substitution/displacement effects and on equilibrium wage effects. The program includes extensive job assistance and wage subsidies to employers. We find that the impact of the program significantly raised transitions to employment by about 5 percentage points. The impact is robust to a wide variety of nonexperimental estimators. However, we present some evidence that this effect may not be as large in the longer run. (JEL: J18, J23, J38) Copyright (c) 2004 The European Economic Association.
Article
This paper uses the Tax Reform Act of 1986 as a natural experiment to identify the labor supply responsiveness of married women to changes in the tax rate. The Tax Reform Act of 1986 reduced the top marginal tax rate by 44 percent (from 50 percent to 28 percent), but changed less the marginal tax rate for those further down the income distribution. I analyze the response of married women at or above the 99th percentile of the income distribution, using as a control group women from the 75th percentile of the income distribution. I therefore identify the tax effect as the difference between the change in labor supply of women with large tax rate reductions and the change in labor supply of women with small tax rate reductions. I find evidence that the labor supply of high-income, married women increased due to the Tax Reform Act of 1986. The increase in total labor supply of married women at the top of the income distribution (relative to married women at the 75th percentile of the income distribution) implies an elasticity with respect to the after- tax wage of approximately 0.8. At least half of this elasticity is due to labor force participation. Use of a second control group supports the participation response but is inconclusive on the hours of work response.
Article
In a recent paper, Piggott and Whalley (1996) argue for the superiority of joint taxation over individual taxation on the grounds that the "conventional wisdom" ignores the existence of household production, and that in the presence of this the usual Ramsey-type argument breaks down. We show in a formal model of 2-person households with domestic production that this is not in fact the case: individual taxation will in general be superior and the grounds on which it can be shown to be so involve a standard Ramsey-like condition.
The effect of marginal tax rates on taxable income: a panel study of the 1988 tax flattening in Canada Joint taxation and the labour supply of married women © 2007 The Authors Journal compilation © Institute for Fiscal Studies
  • M Sillamaa
  • M Veall
Sillamaa, M. and Veall, M. (2001), ‘The effect of marginal tax rates on taxable income: a panel study of the 1988 tax flattening in Canada’, Journal of Public Economics, vol. 80, pp. 341–56. Joint taxation and the labour supply of married women © 2007 The Authors Journal compilation © Institute for Fiscal Studies, 2007 365
The use of tax file data in the Survey of Labour and Income Dynamics: summary report', Statistics Canada, Working Paper no
  • R Dibbs
  • S Poulin
  • M Webber
Dibbs, R., Poulin, S. and Webber, M. (1994), 'The use of tax file data in the Survey of Labour and Income Dynamics: summary report', Statistics Canada, Working Paper no. 94-11.
Comment on 'Labor supply and the economic recovery Tax Act of 1981
  • J J Heckman
  • N Eissa
Heckman, J. J. (1996), "Comment on 'Labor supply and the economic recovery Tax Act of 1981' by Eissa, N.," In Empirical foundations of household taxation, edited by Feldstein, M. and Poterba, J. M., 32-38, University of Chicago Press.
Individual versus Joint Taxation in Models with Household Production: Comment
  • P F Apps
  • R Rees
Apps, P.F. and R. Rees, (1999), "Individual versus Joint Taxation in Models with Household Production: Comment." Journal of Political Economy, 107(2):393-403.
Labor supply and the economic recovery Tax Act of 1981
  • N Eissa
Eissa, N. (1996), " Labor supply and the economic recovery Tax Act of 1981," In Empirical foundations of household taxation, edited by Feldstein, M. and Poterba, J. M., 5-32, University of Chicago Press.
  • Eissa N.
  • McCaffery J. E.