Marriage Stability, Taxation and Aggregate Labor Supply in the U.S. vs. Europe

Indraneel Chakraborty, Serhiy Stepanchuk (sstepanchuk@gmail.com) and Hans Holter
Additional contact information
Serhiy Stepanchuk: Magyar Nemzeti Bank

No 2012:10, Working Paper Series from Uppsala University, Department of Economics

Abstract: Americans work more than Europeans. Using micro data from the U.S. and 17 European countries, we study the contributions from demographic subgroups to these aggregate level di erences. We document that women are typically the largest contributors to the discrepancy in work hours. We also document a negative empirical correlation between hours worked and di erent measures of taxation, driven by men, and a positive correlation between hours worked and divorce rates, driven by women. Motivated by these observations, we develop a life-cycle model with heterogeneous agents, marriage and divorce and use it to study the impact of two mechanisms on labor supply: (i) di erences in marriage stability and (ii) di erences in tax systems. We calibrate the model to U.S. data and study how labor supply in the U.S. changes as we introduce European tax systems, and as we replace the U.S. divorce and marriage rates with their European equivalents. We nd that the divorce and tax mechanisms combined explain 58% of the variation in labor supply between the U.S. and the European countries in our sample.

Keywords: Aggregate Labor Supply; Taxation; Marriage; Divorce; Heterogeneous Households (search for similar items in EconPapers)
JEL-codes: E24 E62 H24 H31 J21 J22 (search for similar items in EconPapers)
Pages: 63 pages
Date: 2012-05-27
New Economics Papers: this item is included in nep-dem, nep-eur, nep-lab, nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Marriage stability, taxation and aggregate labor supply in the U.S. vs. Europe (2015)
Working Paper: Marriage Stability, Taxation and Aggregate Labor Supply in the U.S. vs. Europe (2012)
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