Business Economics and Public Policy Papers

Document Type

Journal Article

Date of this Version

5-2014

Publication Source

The Review of Economics and Statistics

Volume

96

Issue

2

Start Page

287

Last Page

305

DOI

10.1162/REST_a_00425

Abstract

I examine the response of husbands' and wives' earnings to a tax reform in which husbands' and wives' tax rates changed independently, allowing me to examine the effect of both spouses' incentives on each spouse's behavior. I analyze the large Swedish tax reform of 1990–1991 and find that in response to a compensated fall in one spouse's tax rate, each spouse's earnings rise. I compare these results to those of simplified econometric models used in the typical setting in which independent variation in each spouse's tax rate is unavailable. I find that standard econometric specifications may produce substantially biased estimates.

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Date Posted: 27 November 2017

This document has been peer reviewed.