DP8735 Taxing Women: A Macroeconomic Analysis

Author(s): Nezih Guner, Remzi Kaygusuz, Gustavo Ventura
Publication Date: January 2012
Keyword(s): Labour Force Participation, Taxation, Two-earner Households
JEL(s): E62, H31, J12, J22
Programme Areas: International Macroeconomics, Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=8735

Based on well-known evidence on labor supply elasticities, several authors have concluded that women should be taxed at lower rates than men. We evaluate the quantitative implications and merits of this proposition. Relative to the current system of taxation, setting a proportional tax rate on married females equal to 4% (8%) increases output and married female labor force participation by about 3.9% (3.4%) and 6.9% (4.0%), respectively. Gender-based taxes improve welfare and are preferred by a majority of households. Nevertheless, welfare gains are higher when the U.S. tax system is replaced by a proportional, gender-neutral income tax.