DP7337 Analyzing female labor supply -- Evidence from a Dutch tax reform

Author(s): Nicole Bosch , Bas van der Klaauw

Publication Date: June 2009

Keyword(s): Uncompensated wage elasticity , labor force participation , working hours , endogeneity

JEL(s): H24 , J22 , J38

Programme Areas: Labour Economics

Link to this Page: www.cepr.org/pubs/dps/DP7337.asp.asp

Among OECD countries, the Netherlands has average female labor force participation, but by far the highest rate of part-time work. This paper investigates the extent to which married women respond to financial incentives. We exploit the exogenous variation caused by a substantial Dutch tax reform in 2001. Our main conclusion is that the positive significant effect of tax reform on labor force participation dominates the negative insignificant effect on working hours. Our preferred explanation is that women respond more to changes in tax allowances than to changes in marginal tax rates.