THE EFFECT OF TAXES ON MALE AND FEMALE LABOR SUPPLY IN SWEDEN

This paper estimates labor supply functions for married men and women in Sweden using data from 1980, taking account of the complete form of individuals' budget constraints. Both linear and quadratic supply functions are estimated, with and without random preferences. A novel feature is that for women the wage rate and labor supply functions are estimated simultaneously using a full information maximum likelihood method. This method yields substantially larger wage and income elasticities than does the previously used two step methods. Another result is that the quadratic supply function wage elasticities for men and women are virtually the same if the elasticities are evaluated at the same net wage rate and hours of work for men and women. The estimated functions are used to calculate the effect of tax reforms.