Abstract
In the US, both taxes and old-age social security benefits depend on one's marital status and tend to reduce the labour supply of the secondary earner. To what extent are these provisions holding back the female labour supply? We estimate a rich dynamic life-cycle model of labour 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 labour market participation, hours, and savings for married and single people, and generates plausible elasticities of labour 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 participation similar to that of more recent generations.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 102-131 |
| Number of pages | 30 |
| Journal | Review of Economic Studies |
| Volume | 90 |
| Issue number | 1 |
| DOIs | |
| State | Published - Jan 2023 |
Bibliographical note
Funding Information:De Nardi gratefully acknowledges support from the ERC, grant 614328, "Savings and Risks." Yang gratefully acknowledges MRRC grant number 08098401 and hospitality from the Opportunity and Inclusive Growth Institute at the Federal Reserve Bank of Minneapolis. We thank Veronica Guerrieri and four anonymous referees, Joe Altonji, Richard Blundell, Monica Costa Dias, Zvi Eckstein, Joan Gieseke, James Holt, Rasmus Lenz, Derek Neal, Aviv Nevo, and Jon Skinner for useful comments and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research, MRRC, the SSA, the CEPR, any agency of the federal government, the Federal Reserve Bank of Minneapolis, or the Federal Reserve System.
Publisher Copyright:
© 2022 The Author(s).
Keywords
- Labour supply
- Marriage
- Social security
- Taxation
- Welfare
