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Discussion Paper Details

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Title: Income taxation of couples, spouses' labor supplies and the gender wage gap

Author(s): Helmuth Cremer and Kerstin Roeder

Publication Date: September 2018

Keyword(s): Couples' income taxation, gender wage gap, Household Labor Supply and optimal income taxation

Programme Area(s): Public Economics

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.

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Bibliographic Reference

Cremer, H and Roeder, K. 2018. 'Income taxation of couples, spouses' labor supplies and the gender wage gap'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13159