Tax Structure and Female Labour Supply: Evidence from Ireland

How great an effect does the structure of income taxes have on female labour supply? This issue is investigated using a discrete-choice static labour supply model for married couples in Ireland. The model incorporates fixed costs of working and simultaneously explains participation decisions and preferred hours of work. The model is estimated using data from the 1994 wave of the Living in Ireland Survey. Simulations examine the labour supply effects of introducing greater independence in the tax treatment of married couples, compared with an income-splitting system, and alternative forms of tax cuts.