nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒09‒30
24 papers chosen by
Erik Jonasson
Lund University

  1. Estimating Heterogeneous Returns to Education in Germany via Conditional Heteroskedasticity By Saniter, Nils
  2. Skilled Labor Supply, IT-Based Technical Change and Job Instability By Behaghel, Luc; Moschion, Julie
  3. The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees By Fossen, Frank M.; Büttner, Tobias J. M.
  4. Temporary Help Work: Compensating Differentials and Multiple Job-Holding By Hamersma, Sarah; Heinrich, Carolyn J.; Mueser, Peter R.
  5. Unions, Wage Gaps, and Wage Dispersion: New Evidence from the Americas By Rios-Avila, Fernando; Hirsch, Barry T.
  6. How Different Are the Wage Curves for Formal and Informal Workers? Evidence from Turkey By Baltagi, Badi H.; Baskaya, Yusuf Soner; Hulagu, Timur
  7. Gender Gaps in Spain: Policies and Outcomes over the Last Three Decades By Guner, Nezih; Kaya, Ezgi; Sánchez-Marcos, Virginia
  8. An Anatomy of Racial and Ethnic Trends in Male Earnings By Winters, John V.; Hirsch, Barry T.
  9. Childcare Subsidies and Labor Supply: Evidence from a large Dutch Reform By L.J.H. Bettendorf; Egbert L.W. Jongen; Paul Muller
  10. Evolution of Teachers' Salaries in Latin America at the Turn of the 20th Century: How Much Are They (Under or Over) Paid? By Mizala, Alejandra; Nopo, Hugo
  11. Why Unions Reduce Wage Inequality: A model of union formation and goal setting By Stennek, Johan
  12. Technological Change and Wages in China: Evidence From Matched Employer-Employee Data By Vinod Mishra; Russell Smyth
  13. Labor-Market Returns to the GED Using Regression Discontinuity Analysis By Jepsen, Christopher; Mueser, Peter R.; Troske, Kenneth
  14. The Most Egalitarian of All Professions: Pharmacy and the Evolution of a Family-Friendly Occupation By Claudia Goldin; Lawrence F. Katz
  15. Do literacy and numeracy pay off? : on the relationship between basic skills and earnings By Antoni, Manfred; Heineck, Guido
  16. Spouses' Retirement and Hours Outcomes: Evidence from Twofold Regression Discontinuity with Differences-in-Differences By Stancanelli, Elena G. F.
  17. Trade Liberalization and Female Labor Force Participation: Evidence from Brazil By Gaddis, Isis; Pieters, Janneke
  18. Do reservation wages react to regional unemployment? By Blien, Uwe; Messmann, Susanne; Trappmann, Mark
  19. Coping with Intra-Household Job Separation in South Africa's Labor Market By McLaren, Zoe
  20. The German Labor Market after the Great Recession: Successful Reforms and Future Challenges By Caliendo, Marco; Hogenacker, Jens
  21. Family and Labor Market Choices: Requirements to Guide Effective Evidence-Based Policy By Kurowska, Anna; Myck, Michal; Wrohlich, Katharina
  22. "Employability-Miles" and Worker Employability Awareness By Gerards, Ruud; de Grip, Andries; Witlox, Maaike
  23. Pension Coverage for Parents and Educational Investment in Children: Evidence from Urban China By Mu, Ren; Du, Yang
  24. Optimal Taxation, Child Care and Models of the Household By Apps, Patricia; Rees, Ray

  1. By: Saniter, Nils (DIW Berlin)
    Abstract: In this paper I investigate the causal returns to education for different educational groups in Germany by employing a new method by Klein and Vella (2010) that bases identification on the presence of conditional heteroskedasticity. Compared to IV methods, key advantages of this approach are unbiased estimates in the absence of instruments and parameter interpretation that is not bounded to local average treatment effects. Using data from the German Socio-Economic Panel Study (SOEP) I find that the causal return to education is 8.5% for the entire sample, 2.3% for graduates from the basic school track and 11% for graduates from a higher school track. Across these groups the endogeneity bias in simple OLS regressions varies significantly. This confirms recent evidence in the literature on Germany. Various robustness checks support the findings.
    Keywords: return to education, wage equation, control function approach, second moment exclusion restriction
    JEL: C3 I21 J31
    Date: 2012–08
  2. By: Behaghel, Luc (Paris School of Economics); Moschion, Julie (Melbourne Institute of Applied Economic and Social Research)
    Abstract: We provide empirical evidence on the impact of IT diffusion on the stability of employment relationships. We document the evolution of different components of job instability over a panel of 348 local labor markets in France, from the mid-1970s to the early 2000s. Although workers in more educated local labor markets adopt IT faster, they do not experience any increase in job instability. More specifically, we find no evidence that the diffusion of IT increases job-to-job transitions, and we find that it tends to reduce transitions to non-employment among high-school dropouts. Overall, the evidence goes against the view that the diffusion of IT has spurred job instability. Combining local labor market variations with firm data, we argue that these findings can be explained by French firms’ strong reliance on training and internal promotion strategies in order to meet the new skills requirement associated with IT diffusion.
    Keywords: technical change, labor turnover, skill bias, job security, internal labor markets
    JEL: J23 J24 J41
    Date: 2012–09
  3. By: Fossen, Frank M. (Free University of Berlin); Büttner, Tobias J. M. (Technical University of Berlin)
    Abstract: We assess the relevance of formal education for the productivity of the self-employed and distinguish between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees’ rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs.
    Keywords: returns to education, opportunity, necessity, entrepreneurship
    JEL: J23 J24 J31 I20 L26
    Date: 2012–08
  4. By: Hamersma, Sarah (University of Florida); Heinrich, Carolyn J. (University of Texas at Austin); Mueser, Peter R. (University of Missouri-Columbia)
    Abstract: Temporary Help Services (THS) employment has been growing in size, particularly among disadvantaged workers, and in importance in balancing cyclical fluctuations in labor demand. Does THS employment provide some benefits to disadvantaged workers, or divert them from better jobs? We investigate whether THS jobs pay a compensating differential, as would be expected for relatively undesirable jobs. We also address multiple job-holding, exploring whether workers get "stuck" in THS jobs. We find lower quarterly earnings at THS jobs relative to others, but a $1 per hour wage premium. We reconcile these findings by examining hours worked at THS and traditional jobs.
    Keywords: temporary employment, compensating differential, quarterly earnings, wages, multiple jobs
    JEL: J3 J4
    Date: 2012–07
  5. By: Rios-Avila, Fernando (Georgia State University); Hirsch, Barry T. (Georgia State University)
    Abstract: Using a common methodology, the effects of unions on wage levels and wage dispersion are estimated for two neighboring countries, Bolivia and Chile, and for the U.S. The analysis shows that unions have broadly similar effects on the wage distribution within these three economies. The findings suggest that the political economy of unions, coupled with market constraints on labor costs, produce commonality in union wage effects that transcend other economic and institutional differences.
    Keywords: unions, wages, wage dispersion, Latin America
    JEL: J31 J51
    Date: 2012–07
  6. By: Baltagi, Badi H. (Syracuse University); Baskaya, Yusuf Soner (Central Bank of Turkey); Hulagu, Timur (Central Bank of Turkey)
    Abstract: This paper presents wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005-2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a significant role in the economy. Using the Turkish Household Labor Force Survey observed over 26 NUTS-2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups.
    Keywords: formal/informal employment, wage curve, regional labor markets
    JEL: C26 J30 J60 O17
    Date: 2012–09
  7. By: Guner, Nezih (MOVE, Barcelona); Kaya, Ezgi (Universitat Autònoma de Barcelona); Sánchez-Marcos, Virginia (Universidad de Cantabria)
    Abstract: We document recent trends in gender equality in employment and wages in Spain. Despite an impressive decline in gender gap in employment, females are still less likely to work, and if they work they are more likely to be employed part time and with temporary contracts. The gender gap (after controlling for worker and job characteristics) is about 20% and did not change between 1995 and 2006. Furthermore, the gender gap in wages is driven mainly by differences in returns to individual characteristic. While women are more qualified than men in observable labor market characteristics, they end up earning less. Public policy seems to affect female employment. In particular, there was a significant acceleration of female employment in 2000s. This was a period in which many policies that were implemented after early 1990s started to have their longer term effects. It was also a period during which Spain received a large number of immigrants, which had a positive impact on female labor force participation.
    Keywords: gender employment gap, gender wage gap, occupational segregation, quantile regressions, public policy
    JEL: J16 J21 J22 J24
    Date: 2012–08
  8. By: Winters, John V. (University of Cincinnati); Hirsch, Barry T. (Georgia State University)
    Abstract: Progress in narrowing black-white earnings differences has been far from continuous, with some of the apparent progress resulting from labor force withdrawal among lower-skilled African Americans. This paper builds on prior research and documents racial and ethnic differences in male earnings from 1950 through 2010 using data from the decennial census and American Community Surveys. Emphasis is given to annual rather than weekly or hourly earnings. Treatment of imputed earnings greatly affects measured outcomes. We take a quantile approach, providing evidence on medians and other percentiles of the distribution. Black male joblessness rose to over 40% in 2010, the median black-white earnings gap being the largest in at least sixty years. The experience of black men contrasts with that of Hispanic men during the last decade, who exhibited earnings growth similar to white men. Black men are being left behind economically, a process exacerbated by weak labor market conditions.
    Keywords: inequality, race, earnings, wages, median regression, imputed earnings
    JEL: J15 J31
    Date: 2012–07
  9. By: L.J.H. Bettendorf (CPB Netherlands Bureau for Economic Policy Analysis); Egbert L.W. Jongen (CPB Netherlands Bureau for Economic Policy Analysis); Paul Muller (VU University Amsterdam)
    Abstract: Over the period 2005-2009 the Dutch government increased childcare subsidies substantially, reducing the average effective parental fee by 50%, and extended subsidies to so-called guestparent care. We estimate the labour supply effect of this reform with a difference-in-differences strategy, using parents with older children as a control group. We find that the reform had a moderately sized impact on labour supply. Furthermore, the effects are an upper bound since there was also an increase in an earned income tax credit for the same treatment group over the same period. The joint reform increased the maternal employment rate by 2.3%-points (3.0%). Average hours worked by mothers increased by 1.1 hours per week (6.2%). Decomposing the hours effect we find that most of the increase in hours is due to the intensive margin response. A number of robustness checks confirm our results.
    Keywords: Childcare subsidies; labour participation; hours worked; difference-in-differences
    JEL: C21 H40 J13 J22
    Date: 2012–09–13
  10. By: Mizala, Alejandra (University of Chile); Nopo, Hugo (Inter-American Development Bank)
    Abstract: How much are teachers paid in comparison to those in other professions in Latin America? How have these differences evolved at the turn of the 20th century? This paper reports the evolution, between circa 1997 and circa 2007, of teachers´ salaries vis-à-vis workers in other professional and technical occupations for thirteen Latin-American countries. After controlling the earnings differentials by observable characteristics linked to productivity it is found that the hourly earnings gap, although substantial, decreased throughout the decade. This has been the case for earnings gaps at the main and secondary jobs, and also for those measured in terms of monthly and yearly earnings. Nonetheless, behind the region averages there is an important cross-country heterogeneity.
    Keywords: wage differentials, professional labor markets, national and international labor standards, Latin America, Caribbean
    JEL: J31 J44 J8 O54
    Date: 2012–08
  11. By: Stennek, Johan (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper demonstrates how unions can increase the general wage level by redirecting their bargaining power from wages in general to a focus on the lowest wages. This opportunity arises as a result of the interplay between two sources of market power, namely union bargaining power and an efficiency wage premium earned by skilled labor. This result may explain the stylized fact that unions not only increase wages but also reduce wage inequality. It is also demonstrated that low-wage policies may be part of the reason why unions succeed to organize workers of heterogeneous skills.
    Keywords: wage differences; trade unions
    JEL: J31 J51
    Date: 2012–09–18
  12. By: Vinod Mishra; Russell Smyth
    Abstract: We examine the relationship between research and development (R&D) intensity and wages, using a unique matched employer-employee dataset. The dataset has the advantage that it links firm-level investment in R&D to individual employee wages and allows us to control for both employee and employer characteristics. Our main finding is that a one standard deviation increase in R&D intensity is associated with an increase in the hourly wage rate between 3.4 per cent and 6.9 per cent for the full sample, depending on the exact specification. We find that the wage elasticity with respect to R&D intensity is higher in larger firms as well as for better educated workers and workers with technical certification/skills. We also find, consistent with the rent-sharing hypothesis, that the wage elasticity with respect to R&D intensity is higher for workers who belong to the Communist Party or trade union.
    Keywords: R&D, China, Wages, Shanghai
    JEL: J31 O31
    Date: 2012–09
  13. By: Jepsen, Christopher (University of Kentucky); Mueser, Peter R. (University of Missouri-Columbia); Troske, Kenneth (University of Kentucky)
    Abstract: We evaluate the labor-market returns to General Educational Development (GED) certification using state administrative data. We develop a fuzzy regression discontinuity (FRD) method to account for the fact that GED test takers can repeatedly retake the test until they pass it. Our technique can be applied to other situations where program participation is determined by a score on a "retake-able" test. Previous regression discontinuity estimates of the returns to GED certification have not accounted for retaking behavior, so these estimates may be biased. We find that the effect of GED certification on either employment or earnings is not statistically significant. GED certification increases postsecondary participation by up to four percentage points for men and up to eight percentage points for women.
    Keywords: GED, high school dropouts
    JEL: J24 I21
    Date: 2012–07
  14. By: Claudia Goldin; Lawrence F. Katz
    Abstract: Pharmacy has become a female-majority profession that is highly remunerated with a small gender earnings gap and low earnings dispersion relative to other occupations. We sketch a labor market framework based on the theory of equalizing differences to integrate and interpret our empirical findings on earnings, hours of work, and the part-time work wage penalty for pharmacists. Using extensive surveys of pharmacists for 2000, 2004, and 2009 as well as samples from the American Community Surveys and the Current Population Surveys, we explore the gender earnings gap, the penalty to part-time work, labor force persistence, and the demographics of pharmacists relative to other college graduates. We address why the substantial entrance of women into the profession was associated with an increase in their earnings relative to male pharmacists. We conclude that the changing nature of pharmacy employment with the growth of large national pharmacy chains and hospitals and the related decline of independent pharmacies played key roles in the creation of a more family-friendly, female-friendly pharmacy profession. The position of pharmacist is probably the most egalitarian of all U.S. professions today.
    JEL: J24 J31 J44
    Date: 2012–09
  15. By: Antoni, Manfred (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Heineck, Guido
    Abstract: "Is there a reward for basic skills in the German labor market? To answer this question, we examine the relationship between literacy, numeracy and monthly gross earnings of full-time employed workers. We use data from the ALWA survey, augmented by test scores on basic cognitive skills as well as administrative earnings data. Our results indicate that earnings are positively related to both types of skills. There furthermore is no evidence for non-linearity in this relationship and only little heterogeneity when differentiating by sub-groups." (Author's abstract, IAB-Doku) ((en))
    JEL: I21 J31
    Date: 2012–09–18
  16. By: Stancanelli, Elena G. F. (Sorbonne Economics Research Center Paris 1 University)
    Abstract: Earlier studies conclude that spouses' retirement strategies are not independent from each other and that policies affecting individuals in a couple are also likely to affect the economic behaviour of their partner. In this study, we exploit retirement age legislation in France as well as a retirement policy change to identify the effect of own and spousal retirement on spouses' hours. To this end, we use a Fuzzy Regression Discontinuity approach combined with Differences in Differences, for both spouses. The data for the analysis are drawn from French Labour Surveys pooled over thirteen years. The sample for the analysis includes over 85,000 dual-earner couples with spouses aged 50 to 70. We find evidence of large and significant jumps in the own retirement probability at the legal early retirement age for both men and women in a couple. We also conclude that the 1993 reform reduced significantly the probability of retirement at the early retirement age for married men while the effect was not significant for married women. Husbands' retirement probability increases significantly when the wife reaches early retirement age while her retirement probability is not responsive to his early retirement age. We conclude that hours fall significantly upon own and partner's retirement for both spouses. On average, her hours fall by 2.7 per cent when he retires while his hours fall by 5 per cent when she retires, implying an average reduction of one hour per week for women and two hours for men if their spouse retires.
    Keywords: ageing, retirement, regression discontinuity, policy evaluation
    JEL: J14 C1 C36 D04
    Date: 2012–08
  17. By: Gaddis, Isis (University of Göttingen); Pieters, Janneke (IZA)
    Abstract: While there is a large literature analyzing the distributional impacts of trade reforms across the income or skill distribution, very little is known about the gender effects of trade reforms. This paper seeks to fill this gap and investigates the impact of Brazil's 1987-1994 trade liberalization on labor force participation of women. To identify the causal effect of trade reforms we exploit exogenous variation in exposure to tariff reductions across states linked to spatial differences in states' initial industry composition. We find that tariff reductions were associated with an increase in female labor force participation and employment after a period of around two years. Our results are robust to a variety of different approaches in dealing with the potential endogeneity of regional exposure to trade liberalization, alternative measures of trade protection and different time periods. Moreover, we find evidence that employment flows across sectors, especially an accelerated shift from agriculture and manufacturing to trade and other services, but also greater labor market insecurity and male unemployment are behind the observed increase in female economic activity. This suggests that both push and pull factors induced women to join the labor force.
    Keywords: female labor force participation, trade liberalization, Brazil
    JEL: F13 F16 J16 J21 O15
    Date: 2012–08
  18. By: Blien, Uwe (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]); Messmann, Susanne; Trappmann, Mark (Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany])
    Abstract: "Reservation wages indicate the wage threshold for which individual workers are inclined to supply their working capacity. In important theoretical approaches it is assumed that this threshold depends on the unemployment rate. If this is true, the variation of reservation wages might be an important force behind the regional 'wage curve', which has been estimated in many empirical studies. Up to now, the connection of regional unemployment with reservation wages has not been tested, since research possibilities depend on survey data which were not available. With the 'Labour Market and Social Security' study (PASS), a new large panel survey in Germany, information on regional reservation wages is available. The empirical analysis with this data opens up the 'black box' of the wage generation process and delivers insights about its determining factors. The analysis is based on job matching and efficiency wage theory which are used to derive a relationship between unemployment and reservation wages." (Author's abstract, IAB-Doku) ((en))
    Keywords: Einkommenserwartung, Arbeitslosigkeit, regionale Verteilung, IAB-Haushaltspanel, Lohnkurve, Lohnfindung, regionaler Arbeitsmarkt, Effizienzlohntheorie
    JEL: J64 J31 R23
    Date: 2012–09–20
  19. By: McLaren, Zoe (University of Michigan)
    Abstract: In the context of South Africa's pervasive poverty and mass unemployment, households provide an important private safety net for the unemployed. Using new South African Labour Force Survey panel data, I investigate how households cope with job separations and the resulting loss of earned income. Unsurprisingly, I find no evidence of an added worker effect among either men or women. Neither increases in employment or labor market attachment in the year following a household job separation. Instead, households rely on remittances and, to a lesser extent, savings in the wake of a job separation. I find some evidence that households are worse off after a job separation: households reduce expenditures (even in the absence of household composition changes), hold fewer financial assets and are more likely to report frequent food insecurity. Households have viable income replacement strategies to cope with the loss of earned income in the short run, but over the long run job separations are likely to strain these strategies. Addressing structural factors in the labor market that constrain an individual's response to a household shock will enable households to respond more quickly to adverse employment events and limit the long term negative repercussions.
    Keywords: employment, participation, added worker effect, pension, South Africa, developing countries
    JEL: J22 O15
    Date: 2012–08
  20. By: Caliendo, Marco (University of Potsdam); Hogenacker, Jens (IZA)
    Abstract: The reaction of the German labor market to the Great Recession 2008/09 was relatively mild – especially compared to other countries. The reason lies not only in the specific type of the recession – which was favorable for the German economy structure – but also in a series of labor market reforms initiated between 2002 and 2005 altering, inter alia, labor supply incentives. However, irrespective of the mild response to the Great Recession, there are a number of substantial future challenges the German labor market will soon have to face. Female labor supply still lies well below that of other countries and a massive demographic change over the next 50 years will have substantial effects on labor supply as well as the pension system. In addition, due to a skill-biased technological change over the next decades, firms will face problems of finding employees with adequate skills. The aim of this paper is threefold. First, we outline why the German labor market reacted in such a mild fashion, describe current economic trends of the labor market in light of general trends in the European Union, and reveal some of the main associated challenges. Thereafter, the paper analyzes recent reforms of the main institutional settings of the labor market which influence labor supply. Finally, based on the status quo of these institutional settings, the paper gives a brief overview of strategies to combat adequately the challenges in terms of labor supply and to ensure economic growth in the future.
    Keywords: benefit systems, labor supply, labor force participation, unemployment, public policy
    JEL: J26 J38 J68
    Date: 2012–08
  21. By: Kurowska, Anna (Warsaw University); Myck, Michal (Centre for Economic Analysis, CenEA); Wrohlich, Katharina (DIW Berlin)
    Abstract: Microsimulation methods and models of labor market decisions have attracted a lot of attention as an approach to the assessment of consequences of family related policies in the area of labor market and fertility. We set these models in the context of relevant demographic theories and present them from the point of view of their potential as tool to guide effective policy making with the aim to reconcile the objectives of increasing female participation and fertility and reducing poverty levels among families with children.
    Keywords: microsimulation, labor supply, fertility, evidence-based policy
    JEL: J22 J13 J18
    Date: 2012–09
  22. By: Gerards, Ruud (ROA, Maastricht University); de Grip, Andries (ROA, Maastricht University); Witlox, Maaike (Maastricht University)
    Abstract: This article studies the use and impact of a firm-sponsored training ("Employability-miles") voucher scheme that aims to stimulate employees to develop a more active attitude toward their own employability. Using data from two surveys of the firm's workforce, we find that voucher use is related to various personality traits and personal characteristics. In particular, a worker's ambition, goal setting, and education level are positively related to voucher use. In addition, women and those with longer tenure spend their vouchers more often. Conversely, workers with a more positive self-image as well as those who are negatively reciprocal spend their vouchers less often. The negative relation between voucher use and negative reciprocity suggests that workers who are more negatively reciprocal perceive the voucher as an HR tool for outplacement. Further, we find that voucher use positively affects worker employability awareness and willingness to train. Remarkably, participation in non-voucher training shows little relation to personality traits. From a human resources perspective, this finding suggests that by employing a voucher scheme, the firm makes training participation more dependent on employee personality and individual characteristics instead of the human resources development strategy of the firm.
    Keywords: employability, voucher, training, human resource development, human capital
    JEL: J24 M53
    Date: 2012–08
  23. By: Mu, Ren (Texas A&M University); Du, Yang (Chinese Academy of Social Sciences)
    Abstract: When social security is established to provide pensions to parents, their reliance upon children for future financial support decreases; and their need to save for retirement also falls. We use the expansion of pension coverage from the state sector to the non-state sector in urban China as a quasi-experiment to analyze the intergenerational impact of social security on educational investments in children. With a difference-in-differences framework, we find a significant increase in the total education expenditure attributable to pension expansion. The results are unlikely to be driven by trends in medical insurance, wages, bonus income, and housing values. They are robust to the inclusion of a large set of control variables and to different specifications, including one based on the instrumental variable method.
    Keywords: pension, education expenditure, gender difference, urban, China
    JEL: J26 J24 O15 D13
    Date: 2012–08
  24. By: Apps, Patricia (University of Sydney); Rees, Ray (University of Munich)
    Abstract: This paper presents for the first time the properties of optimal piecewise linear tax systems for two-earner households, based on joint and individual incomes respectively. A key contribution is the analysis of the interaction of second earner wage differences, variation in prices of bought-in inputs into household production in the form of child care, and domestic productivity differences as determinants of across-household heterogeneity in second earner labour supply. The analysis highlights the importance of the elasticity of substitution between parental and non-parental child care in determining the relationship between utility and income across households. A central result is that taking account of a richer and more realistic specification of household time use widens the set of cases in which individual taxation is welfare-superior to joint taxation.
    Keywords: optimal taxation, time allocation, household production, child care, inequality, labour supply
    JEL: J22 H21 H24 H31 D13
    Date: 2012–08

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