A Structural Estimation of the Effects of Spousal Tax Deduction and Social Security Systems on the Labor Supply of Japanese Married Women

Shingo Takahashi

No EMS_2010_08, Working Papers from Research Institute, International University of Japan

Abstract: Japanese spousal tax deduction and social security systems cause a non-convex piece-wise budget constraint for married women. Using a pooled sample from the Japanese Panel Survey of Consumers, we structurally estimated a labor supply model that explicitly takes into account the nonlinearity in the budget constraint. Our results suggest that the effects of spousal deduction and social security reforms on the labor supply of Japanese married women would be much smaller than what the past reduced form studies suggest. The reform to completely eliminate the spousal tax deduction would increase the population labor supply only by 0.7%, though the labor supply responses of the most affected workers would be nontrivial, with their desired hours worked increasing by as much as 4%. The policy reform to require all women to pay the social security premium regardless of their income level would have almost no effects on the population labor supply. Our results also suggest that lump-sum income transfer programs, such as the current child care support program, would have negligible effects on female labor supply unless the transfers are substantially large.

Keywords: Structural estimation; Non-convex budget set; Female labor supply; Spousal deduction; Social Security System (search for similar items in EconPapers)
JEL-codes: H24 J20 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2010-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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