Tax and transfer policies and the female labor supply in the EU

Klara Kaliskova

Empirical Economics, 2020, vol. 58, issue 2, No 15, 749-775

Abstract: Abstract This study measures 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. The results suggest that a 10 percentage point increase in the participation tax rate decreases the female employment probability by 2.5 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.

Keywords: Female labor supply; Tax and benefit system; EU; Instrumental variable (search for similar items in EconPapers)
JEL-codes: C25 H24 H31 J22 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Tax and Transfer Policies and the Female Labor Supply in the EU (2015)
Working Paper: Tax and Transfer Policies and the Female Labor Supply in the EU (2014)
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DOI: 10.1007/s00181-018-1544-2

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