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Joint Taxation and the Labour Supply of Married Women: Evidence from the Canadian Tax Reform of 1988 *
Author(s) -
Crossley Thomas F.,
Jeon SungHee
Publication year - 2007
Publication title -
fiscal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.63
H-Index - 40
eISSN - 1475-5890
pISSN - 0143-5671
DOI - 10.1111/j.1475-5890.2007.00059.x
Subject(s) - economics , tax reform , labour economics , tax credit , liberian dollar , state income tax , indirect tax , value added tax , direct tax , ad valorem tax , tax rate , labour supply , double taxation , monetary economics , public economics , finance
The Canadian federal tax reform of 1988 replaced a spousal tax exemption with a non‐refundable tax credit. This reduced the‘jointness’of the tax system: after the reform, secondary earners’effective‘first dollar’marginal tax rates no longer depended on the marginal tax rates of their spouses. In practice, the effective‘first dollar’marginal tax rates faced by women with high‐income husbands were particularly reduced. Using difference‐indifference estimators, we find a significant increase in labour force participation among women married to higher‐income husbands.