Publication: Taxation, Aggregates and the Household
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2008
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Abstract
We evaluate reforms to the U.S. tax system in a dynamic setup with heterogeneous married and single households, and with an operative extensive margin in labour supply. We restrict our model with observations on
gender and skill premia, labour force participation of married females across
skill groups, and the structure of marital sorting. We study four revenueneutral
tax reforms: a proportional consumption tax, a proportional income tax,
a progressive consumption tax, and a reform in which married individuals file
taxes separately. Our findings indicate that tax reforms are accompanied by
large and differential effects on labour supply: while hours per-worker display
small increases, total hours and female labour force participation increase
substantially. Married females account for more than 50% of the changes in
hours associated to reforms, and their importance increases sharply for values
of the intertemporal labour supply elasticity on the low side of empirical
estimates. Tax reforms in a standard version of the model result in output gains that are up to 15% lower than in our benchmark economy.
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Publicado por otras Instituciones: IZA, nº 3318; FRBM, nº 660
Keywords
labour force participation, taxation and two-earner households