Property Tax Limits and Female Labor Supply: Evidence from the Housing Boom and Bust

Abstract

This paper investigates whether and how property tax limits impact female labor supply during the housing boom and bust. Theory predicts that property tax limits increase non-labor income during the housing boom and decrease non-labor income during the bust periods, leading to opposite effects on labor supply during the boom and bust periods. Exploiting exogenous variation of housing market conditions in the housing boom and bust and geographic changes of property tax limits in the cross-state Combined Statistical Areas, we test the theory and find that property tax limits reduced female labor force participation by 0.7 to 1.4 percentage points during the housing boom (2005-2006) as predicted. In contrast, the impact of property tax limits on female labor force participation during the housing bust (2008-2009) is always positive but not statistically significant in most specifications. These results are consistent with our model and provide new evidence of housing wealth effects in the labor market.

Keywords: Property Tax Limit; Female Labor Supply; Border Difference-in-Difference; Housing Boom and Bust

JEL Classification: R23, J22, H31, R38