Tax and Transfer Policies and the Female Labor Supply in the EU

30 Pages Posted: 6 Apr 2015

See all articles by Klára Kalíšková

Klára Kalíšková

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

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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.

Keywords: female labor supply, tax and benefit system, Europe, instrumental variable

JEL Classification: C25, H24, H31, J22

Suggested Citation

Kalíšková, Klára, Tax and Transfer Policies and the Female Labor Supply in the EU. IZA Discussion Paper No. 8949, Available at SSRN: https://ssrn.com/abstract=2589811 or http://dx.doi.org/10.2139/ssrn.2589811

Klára Kalíšková (Contact Author)

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

Politickych veznu 7
Prague, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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