Taxation and Labor Supply of Married Women across Countries: A Macroeconomic Analysis

We document contemporaneous differences in the aggregate labor supply of married couples across 17 European countries and the US. Based on a model of joint household decision making, we quantify the contribution of international differences in non-linear labor income taxes and consumption taxes, as well as the educational composition, and gender wage gaps and educational premia, to the international differences in hours worked in the data. Through the lens of our model, taxes, wages, and the educational composition account for a large part of the small differences in married men’s and the large differences in married women’s hours worked between the US and Europe in the data. The non-linearity of labor income taxes leads to substantially different effects of taxation on married men and women, and explains a significant part of the variation in married women’s labor supply within Europe. Consumption taxes on the other hand are the main factor causing the US-Europe difference in married women’s hours worked.