Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?

87 Pages Posted: 23 Jul 2019

See all articles by Margherita Borella

Margherita Borella

University of Torino - Dipartimento di scienze economico-sociali e matematico-statistiche; CeRP - Collegio Carlo Alberto

Mariacristina De Nardi

University College London, Economics Dpt.; Federal Reserve Bank of Chicago; National Bureau of Economic Research (NBER) - Public Economics

Fang Yang

Louisiana State University, Baton Rouge

Date Written: July 2019

Abstract

In the United States, both taxes and old age Social Security benefits depend on one's marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich life cycle model of labor supply and savings for couples and singles using the method of simulated moments (MSM) on the 1945 and 1955 birth-year cohorts and use it to evaluate what would happen without these provisions. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. Eliminating marriage-related provisions drastically increases the participation of married women over their entire life cycle, reduces the participation of married men after age 60, and increases the savings of couples in both cohorts, including the later one, which has similar participation to that of more recent generations. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population.

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Suggested Citation

Borella, Margherita and De Nardi, Mariacristina and Yang, Fang, Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply? (July 2019). NBER Working Paper No. w26097. Available at SSRN: https://ssrn.com/abstract=3423809

Margherita Borella (Contact Author)

University of Torino - Dipartimento di scienze economico-sociali e matematico-statistiche ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy

HOME PAGE: http://https://sites.google.com/site/margheritaborella/

CeRP - Collegio Carlo Alberto

Via Real Collegio, 30
Moncalieri, Turin
Italy
+39 011 647 6525 (Phone)
+39 011 640 3680 (Fax)

Mariacristina De Nardi

University College London, Economics Dpt. ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Federal Reserve Bank of Chicago ( email )

Research Department
230 South LaSalle Street
Chicago, IL 60604
United States
312 322 5769 (Phone)
312 322 2357 (Fax)

HOME PAGE: http://www.nber.org/~denardim

National Bureau of Economic Research (NBER) - Public Economics ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://www.nber.org/~denardim

Fang Yang

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

HOME PAGE: http://faculty.bus.lsu.edu/fyang/

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