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Taxation and Labor Force Participation: The Case of Italy

Author

Listed:
  • Fabrizio Colonna

    (BI - Banca d´Italia)

  • Stefania Marcassa

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

Abstract

Italy has the lowest labor force participation of women among European countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner households, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.

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  • Fabrizio Colonna & Stefania Marcassa, 2013. "Taxation and Labor Force Participation: The Case of Italy," Working Papers hal-00869315, HAL.
    • Handle: RePEc:hal:wpaper:hal-00869315
    Note: View the original document on HAL open archive server: https://hal.science/hal-00869315
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    Cited by:

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    2. Dalila De Rosa & Gloria Di Caprera & Francesco Figari & Carlo Fiorio & Pasquale Giacobbe & Marco Manzo & Elena Miola & Giorgio Mongelli & Chiara Subrizi, 2023. "L’Assegno Unico e Universale e la revisione dell’IRPEF nel 2022: un’analisi di equità ed efficienza per famiglie di lavoratori dipendenti," Working Papers wp2023-19, Ministry of Economy and Finance, Department of Finance.
    3. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis, in: Handbook of Microsimulation Modelling, volume 127, pages 167-221, Emerald Group Publishing Limited.
    4. Pacifico, Daniele & Browne, James & Fernandez, Rodrigo & Immervoll, Herwig & Neumann, Dirk & Thévenot, Céline, 2018. "Faces of Joblessness in Italy: A People-Centred Perspective on Employment Barriers and Policies," IZA Discussion Papers 11768, Institute of Labor Economics (IZA).
    5. Ugo Colombino, 2015. "Five Crossroads on the Way to Basic Income. An Italian Tour," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 1(3), pages 353-389, November.
    6. Ugo Colombine, 2013. "A new equilibrium simulation procedure with discrete choice models," International Journal of Microsimulation, International Microsimulation Association, vol. 6(3), pages 25-49.
    7. Giulia M Dotti Sani & Stefani Scherer, 2018. "Maternal Employment: Enabling Factors in Context," Work, Employment & Society, British Sociological Association, vol. 32(1), pages 75-92, February.
    8. Colombino, Ugo & Narazani, Edlira, 2014. "Closing the Gender Gap: Gender Based Taxation, Wage Subsidies or Basic Income?," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201412, University of Turin.
    9. Ciani, Emanuele, 2016. "Retirement, pension eligibility and home production," Labour Economics, Elsevier, vol. 38(C), pages 106-120.
    10. Bachmann, Ronald & Bechara, Peggy & Cim, Merve & Kramer, Anica, 2018. "Working women and labour market inequality. Research project for the Wilfried Martens Centre for European Studies: Final report - July 2018," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 195939.

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    More about this item

    Keywords

    female labor force participation; Italian tax system; second earner tax rate; joint taxation; gender-based taxation; working tax credit;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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