PRELIMINARY AND INCOMPLETE: PLEASE DO NOT CIRCULATE Taxes and Time Allocation: Evidence from Single Women

Hundreds of papers have investigated how incentives and policies affect hours worked in the market. This paper examines how income taxes affect time allocation in the other two-thirds of the day. Using the Panel Study of Income Dynamics from 1975 to 2004, we analyze the response of single women's housework, labor supply, and other time to variation in tax and transfer schedules across income levels, number of children, states, and time. We find that when the economic reward to participating in the labor force increases, hours worked increase and housework decreases, with the decrease in housework accounting for roughly three-quarters of the increase in market work. Analysis of repeated cross-sections of time diary data from 1975 to 2004 shows similar results, with various measures of "home production" accounting for at least half of the increase in market hours of work in response to policy changes. Data on expenditures from the Consumer Expenditure Survey from 1980-2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to an increased incentive to join the labor force. The results are consistent with the classic time allocation model of Becker (1965). * We thank Raj Chetty, David Cutler, Lawrence Katz, Bruce Meyer, Claudia Olivetti, Dan Sacks, Todd Sinai, Justin Wolfers, and numerous seminar participants for suggestions. We are grateful to Adam Looney, Bruce Meyer, and Mel Stephens for generously sharing data. We are also grateful to Mark Aguiar and Erik Hurst for making their data and code available on the web. Dan Sacks provided outstanding research assistance. Gelber acknowledges financial support from the National Institute on Aging, Grant Number T32-AG00186. All errors are our own. Email: [email protected].