Taxing Families: The Impact of Child-Related Transfers on Maternal Labor Supply

Anne Hannusch ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Childbirth causes persistent gender differences in labor force participation and the difference in employment rates of married women with and without pre-school children varies substantially across countries. To what extent can child-related transfers account for this differential? To answer this question, I develop a life-cycle model of joint labor supply, in which female human capital evolves endogenously and a fraction of households has access to informal childcare. I calibrate the model to the US and Denmark, two countries in which the gap in employment rates of women with and without pre-school children differs in sign and magnitude: the gap is 13.2% in the US and -3.7% in Denmark. After taking the labor income tax treatment of married couples and variation in childcare fees into account, I find that child-related transfers are key to explaining the positive gap in the US and the negative gap in Denmark. I show that this mechanism is quantitatively important to account for variation in the maternal participation gap across other European countries as well.

Keywords: Maternal Labor Supply; Two-earner Households; Family Transfers; Taxation (search for similar items in EconPapers)
JEL-codes: E62 H31 J12 J22 (search for similar items in EconPapers)
Pages: 52
Date: 2019-01
New Economics Papers: this item is included in nep-dem, nep-eur, nep-lma, nep-mac, nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_067

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