Taxation and Labor Force Participation: The Case of Italy

Stefania Marcassa () and Fabrizio Colonna ()
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Stefania Marcassa: Université de Cergy-Pontoise, THEMA
Fabrizio Colonna: Banca d’Italia, Economic Structure and Labor Market Division.

No 2011-22, Thema Working Papers from THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS

Abstract: Italy has the lowest labor force participation of women among OECD countries. Moreover, the participation rate of married women is positively correlated to their husbands' income. We show that a high tax schedule together with tax credits and transfers raise the burden of two-earner house- holds, generating disincentives to work. We estimate a structural labor supply model for women, and use the estimated parameters to simulate the effects of alternative revenue-neutral tax systems. We find that joint taxation implies a drop in the participation rate. Conversely, working tax credit and gender-based taxation boost it, with the effects of the former concentrated on low educated women.

Keywords: female labor force participation; Italian tax system; second earner tax rate; joint taxation; gender-based taxation; working tax credit JEL Classification: J21; J22; H31 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-acc, nep-lab, nep-lma and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2011-22

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