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Lifecycle consistent estimation of effect of taxes on female labor supply in the US: evidence from panel data

Author

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  • Anil Kumar

Abstract

Very few existing studies have estimated female labor supply elasticities using a U.S. panel data set, though cross-sectional studies abound. Also, most existing studies have modeled female labor supply in the U.S. in a static framework. I make an attempt to fill the gap in this literature, by estimating a lifecycle-consistent specification with taxes, in a limited dependent variable framework, on a panel of married females from the PSID. Both parametric random effects and semiparametric fixed effects methods are applied. The estimate of compensated elasticity for females in the sample is 0.63 (with a standard error of 0.14). These estimates are fairly robust to the choice of both random effects and semiparametric fixed effect estimators and also to the choice of instruments for the endogenous net wage and virtual full income. I estimate exact deadweight loss from taxes and find that deadweight loss from a 20 percent increase in the marginal tax rate is about 18 percent of tax revenue collected, evaluated at the sample mean.

Suggested Citation

  • Anil Kumar, 2005. "Lifecycle consistent estimation of effect of taxes on female labor supply in the US: evidence from panel data," Working Papers 0504, Federal Reserve Bank of Dallas.
    • Handle: RePEc:fip:feddwp:05-04
    Note: Published as: Kumar, Anil (2016), "Lifecycle-Consistent Female Labor Supply with Nonlinear Taxes: Evidence from Unobserved Effects Panel Data Models with Censoring, Selection and Endogeneity," Review of Economics of the Household 14 (1): 207-229.
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    Citations

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    Cited by:

    1. Marta González-Torrabadella & Josep Pijoan-Mas, 2006. "Flat tax reforms: a general equilibrium evaluation for Spain," Investigaciones Economicas, Fundación SEPI, vol. 30(2), pages 317-351, May.
    2. Solomon W. Polachek & Jun Xiang, 2009. "The Gender Pay Gap across Countries: A Human Capital Approach," SOEPpapers on Multidisciplinary Panel Data Research 227, DIW Berlin, The German Socio-Economic Panel (SOEP).
    3. Darío Serrano-Puente, 2020. "Optimal progressivity of personal income tax: a general equilibrium evaluation for Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 11(4), pages 407-455, December.
    4. Bradley T. Heim, 2009. "Structural Estimation of Family Labor Supply with Taxes: Estimating a Continuous Hours Model Using a Direct Utility Specification," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).

    More about this item

    Keywords

    Labor supply; Women - Employment; Wages;
    All these keywords.

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