New Estimates of Labour Supply Elasticities for Married Women in Canada 1996–2005

Benoit Dostie , Lene Kromann

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

In this article, we estimate income and substitution labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996–2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and nonlabour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average tax rates instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.

Original languageEnglish
JournalApplied Economics
Volume45
Issue number31
Pages (from-to)4355-4368
ISSN0003-6846
DOIs
Publication statusPublished - Nov 2013

Cite this

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title = "New Estimates of Labour Supply Elasticities for Married Women in Canada 1996–2005",
abstract = "In this article, we estimate income and substitution labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996–2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and nonlabour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average tax rates instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.",
keywords = "Labour supply, Elasticities, Labour force participation, Taxes, Canada",
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New Estimates of Labour Supply Elasticities for Married Women in Canada 1996–2005. / Dostie , Benoit; Kromann, Lene.

In: Applied Economics, Vol. 45, No. 31, 11.2013, p. 4355-4368.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - New Estimates of Labour Supply Elasticities for Married Women in Canada 1996–2005

AU - Dostie , Benoit

AU - Kromann, Lene

PY - 2013/11

Y1 - 2013/11

N2 - In this article, we estimate income and substitution labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996–2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and nonlabour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average tax rates instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.

AB - In this article, we estimate income and substitution labour supply and participation elasticities for Canadian married women using data from the Survey of Labour and Income Dynamics 1996–2005. We use the Canadian Tax and Credit Simulator (CTaCS) and detailed information on the structure of income at the household level to compute the marginal tax rates faced by each individual. We then use these marginal tax rates to compute net own-wage, spouse-wage, and nonlabour income. We show how the magnitude of the estimated elasticities varies depending on whether net or gross wages and income are used in the estimation procedure, and quantify biases caused by using average tax rates instead of marginal tax rates. Finally, because marginal tax rates vary significantly over the sample, we use quantile regressions to compare elasticities at different points of the hours distribution. Overall, our results show that public policies now have, on average, less scope for influencing hours of work than 10 years ago. However, the quantile results show that wives working fewer hours per week are more sensitive to changes in their own or spouses' wages.

KW - Labour supply

KW - Elasticities

KW - Labour force participation

KW - Taxes

KW - Canada

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JF - Applied Economics

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