Mariacristina De Nardi, Federal Reserve Board of Minneapolis

"Are Marriage-Related Taxes and Social Security Benefits Holding Back Female Labor Supply?"

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.

Joint with Margherita Borella (Università di Torino) and Fang Yang (Louisiana State University)

You can read more about Mariacristina and her research here

CEBI contact: Søren Leth-Petersen