Working Paper: CEPR ID: DP13159
Authors: Helmuth Cremer; Kerstin Roeder
Abstract: We study the taxation of couples when female wages do not reflect their true productivity. We show that the expression for the marginal tax rates of the male spouses is the same as in a Mirrleesian world where wages reflect true productivities. Marginal taxes for the female spouses are reduced because of a Pigouvian correction. Consequently, the wage discrimination pleads for a lower marginal tax on the female spouse. Furthermore, the distortion of a couples' tradeoff between male and female labor supply is the same as in a Mirrleesian world without a gender wage gap. It only depends on true productivities and not on wages. In other words, the tax system completely neutralizes the extra distortion introduced by the wedge between the female spouse's wage and her true productivity.
Keywords: couples; income taxation; gender wage gap; optimal income taxation; household labor supply
JEL Codes: H21; H31; D10; J16; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Gender wage discrimination (J71) | marginal tax rates for female spouses (H31) |
| Tax system (H20) | distortion in trade-off between male and female labor supply (J79) |
| Tax system (H20) | neutralizes distortions introduced by gender wage gap (J79) |
| Marginal tax rates for male spouses (H31) | equivalent to those in a Mirrleesian world (P19) |
| Pigouvian correction (H23) | reduces marginal tax rates for female spouses (H31) |