Working Paper: NBER ID: w26097
Authors: Margherita Borella; Mariacristina De Nardi; Fang Yang
Abstract: In the United States, both taxes and old age Social Security benefits depend on one’s marital status and tend to discourage the labor supply of the secondary earner. To what extent are these provisions holding back female labor supply? We estimate a rich dynamic life-cycle model of labor supply and savings for couples and singles using the Method of Simulated Moments for the 1945 and 1955 birth cohorts. Our model matches well the life cycle profiles of labor market participation, hours, and savings for married and single people, and generates plausible elasticities of labor supply. It implies that eliminating these marriage-related provisions would drastically increase the participation of married women over their entire life cycle, reduce the participation of married men after age 60, and increase savings. If the resulting government surplus were used to lower income taxation, there would be large welfare gains for the vast majority of the population. These results hold for both cohorts, including the later one, which has similar participation to that of more recent generations.
Keywords: female labor supply; marriage-related taxes; social security benefits
JEL Codes: E21; H2; J22; J31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| joint taxation (H20) | female labor supply (J21) |
| social security benefits (H55) | female labor supply (J21) |
| elimination of marriage-related provisions (J12) | female labor supply (J21) |
| elimination of marriage-related provisions (J12) | male labor supply (J20) |
| elimination of marriage-related provisions (J12) | savings for married couples (D14) |