STICERD Work in Progress Seminars
The aggregate productivity consequences of the marriage tax on working
Eui Jung (Jay) Lee (Department of Economics, LSE)
Friday 15 March 2019 13:00 - 14:00
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About this event
What are the aggregate productivity consequences of converging labor force participation between marrieds and singles? Married individuals face different constraints in their labor force participation choice, including the need to fulfill gender roles within the household and differential treatment by firms. While the aggregate productivity effects of discrimination by gender has been studied as a whole (Hsieh et al, 2018), failing to distinguish marrieds and singles can lead to misleading policy implications that, accordingly, do not address differences along marital status. I use a model featuring education, marriage market and labor supply decision as a tool to measure the magnitude of these differential constraints. I find that relative to single women, married women in 1940 US faced constraints against working in the labor market amounting to a 40% tax on wage, which halved by 2000. Had these constraints remained at the level of 1940, married women's labor force participation would have been lower by 17% and market earnings by 7% in 2000. As the wife's share of household income would also have been lower by 7%, these constraints potentially prolong an imbalance in intra-household bargaining power. The weakening of these constraints also contributed to a small degree to the faster rise in education for women relative to men, as well as the trend of increasingly positive selection into marriage by higher-educated women.