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

Author

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  • Klára Kalíšková

    (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Czech Academy of Sciences
    University of Economics, Prague)

Abstract

This study measures 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. The results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2.5 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.

Suggested Citation

  • Klára Kalíšková, 2020. "Tax and transfer policies and the female labor supply in the EU," Empirical Economics, Springer, vol. 58(2), pages 749-775, February.
    • Handle: RePEc:spr:empeco:v:58:y:2020:i:2:d:10.1007_s00181-018-1544-2
    DOI: 10.1007/s00181-018-1544-2
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    More about this item

    Keywords

    Female labor supply; Tax and benefit system; EU; Instrumental variable;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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