Scandinavian Working Papers in Economics

Working Paper Series,
Uppsala University, Department of Economics

No 2018:2: Taxes and Household Labor Supply: Estimating Distributional Effects of Nonlinear Prices on Multidimensional Choice

Che-Yuan Liang ()
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Che-Yuan Liang: Department of Economics

Abstract: We develop a method for distributional regression of joint multidimensional choice on nonlinear prices departing from a household model of labor supply that focuses on tax policy effects. Our distribution functions are derived under minimal theoretical assumptions and have a simple structure. We allow distribution-free estimation, collective decisionmaking, and identification based on tax reforms. In our empirical application on U.S. panel data from 1980 to 2006, we provide a deepened understanding of how the configuration of the tax system affects the distribution of transitions between combinations of spouse labor supply. We also quantify biases from commonly imposed restrictions.

Keywords: household labor supply; nonlinear budget sets; distributional regression; collective choice; distribution-free estimation; tax reforms

JEL-codes: D11; H24; J22

40 pages, February 1, 2018

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