Marriage-related Policies in an Estimated Life-cycle Model of Households’ Labor Supply and Savings for Two Cohorts
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Abstract
In the United States, both taxes and old age Social Security benefits explicitly depend on one’s marital status. We study the effects of eliminating these marriage-related provisions on the labor supply and savings of two different cohorts. To do so, we estimate a rich life-cycle model of couples and singles using the method of simulated moments (MSM) on the 1945 and 1955 birth-year cohorts. Our model matches well the life-cycle profiles of labor market participation, hours, and savings for married and single people and generates plausible elasticities of labor supply. We find that these marriage-related provisions reduce the participation of married women over their life cycle, the participation of married men after age 55, and the savings of couples. These effects are large for both the 1945 and 1955 cohorts, even though to start with the latter had much higher labor market participation of married women.
Key Findings
- We estimate a rich life-cycle model of couples and singles with marriage-related policies (marital income tax, and Social Security spousal and survival benefits).
- We find that these marriage-related provisions reduce the participation of married women over their life cycle, the participation of married men after age 55, and the savings of couples.
- These effects are also large for the 1955 cohort who had much higher labor market participation of married women to start with.
Citation
Borella, Margherita, and Mariacristina De Nardi, and Fang Yang. 2017. “Marriage-related Policies in an Estimated Life-cycle Model of Households’ Labor Supply and Savings for Two Cohorts.” Ann Arbor MI: University of Michigan Retirement Research Center (MRRC) Working Paper, WP 2017-371. http://mrrcold.isr.umich.edu/publications/papers/pdf/wp371.pdf
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Paper ID
WP 2017-371Publication Type
Working Paper