Tax and transfer policies and female labor supply in the EU

Kalíšková, Klára

No EM1/15, EUROMOD Working Papers from EUROMOD at the Institute for Social and Economic Research

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.

Date: 2015-01-26
New Economics Papers: this item is included in nep-eur, nep-lab and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:ese:emodwp:em1-15

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