Tax and transfer policies and female labor supply in the EU

Publication type

Research Paper

Series Number

524

Series

CERGE-EI Working Paper Series

Author

Publication date

December 15, 2014

Abstract:

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.

ISSN

12113298

Subjects

Link

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2549457

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