August 3, 2010

Analyzing female labor supply: Evidence from a Dutch tax reform

This paper uses the exogenous variation caused by the Dutch tax reform of 2001 to investigate how married women react to financial incentives.

Among OECD countries, the Netherlands has average female labor force participation, but by far the highest rate of part-time work. Our main conclusion is that the positive significant effect of the 2001 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.