Thursday, 10 May 2012

Analyzing female labor supply — Evidence from a Dutch tax reform

an article by Nicole Bosch (CPB Netherlands Bureau for Economic Policy Analysis, The Hague) and Bas van der Klaauwb (VU University Amsterdam, Tinbergen Institute and CEPR, Department of Economics, VU University Amsterdam) published in Labour Economics Volume 19 Issue 3 (June 2012)


Among OECD countries, the Netherlands has an average female labour force participation, but by far the highest rate of part-time work. This paper investigates the extent to which married women respond to financial incentives.

We exploit exogenous variation caused by a substantial Dutch tax reform in 2001.

Our main conclusion is that the positive significant effect of the tax reform on labour force participation dominates the negative insignificant effect on working hours. The latter contradicts the common empirical finding of positive wage elasticities.

Our preferred explanation is that women respond more to changes in tax allowances than to changes in marginal tax rates.

JEL classification
H24; J22; J38

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