Job Market Paper
Joint taxation of couples is often criticized for distorting labor supply and reinforcing household income inequality, particularly by disincentivizing secondary earners. Yet, empirical evidence is limited, as switching to joint taxation is typically endogenous and observed responses among different-sex couples are confounded by gender norms. We study the 2013 extension of joint income taxation to same-sex civil partners in Germany to isolate how tax incentives influence household income allocation. Using administrative tax return data on the universe of filers, we provide the first large-scale evidence on same-sex couples in Germany. We find that joint taxation increases within-couple inequality, primarily through reduced earnings of secondary earners. The partner pay gap rises by 4.1 percentage points - a 12.8% increase relative to the pre-reform level. Couples with children and initially equal earnings respond most. Exploiting heterogeneity in marginal tax rate changes, we find weak secondary-earner elasticities, consistent with household reallocation toward greater specialization rather than individual responses proportional to marginal tax incentives. Additionally, we show that same-sex couples are less likely than different-sex couples to choose withholding schemes that reinforce income differences between partners. Together, our findings show that joint taxation increases intra-household inequality, especially when there is scope for specialization and incentives align with gender norms.
Working Papers
With: Johannes Hermle & Nikolaus Hildebrand
Reject & Resubmit: Journal of Political Economy
IZA DP No. 16803
What preferences do partners hold over their relative income within the household? We provide a flexible framework of preferences over relative income within the household and study their role for marital selection, separation, and household public good provision in a marriage market matching model with search frictions. We test the model predictions using large administrative tax data from Germany. We document the existence of a kink point in the relative income distribution at the point of spousal income equality. We also find the presence of a convex kink in wives’ household public good provision, suggesting that women bear the incidence of spousal relative income preferences. To disentangle the preferences of women and men, we implement a survey experiment. Our results indicate that women exhibit inequality aversion while men exhibit a preference for being the primary earner.
What happens to earnings upon marriage? Linking administrative and survey data from Germany, we show that there is a marriage earnings gap. Even after accounting for the child penalty, women’s earnings drop by 20% after marriage. We show that the marriage earnings gap results from both the extensive margin (women stop working) and the intensive margin (women work fewer hours), but not from a decrease in hourly wages. Labor supply disincentives from joint taxation can explain about one quarter of the marriage earnings gap, while we find no effect for labor supply incentives from changes in divorce law. In addition to tax incentives, we show that gender norms are an important mechanism behind the marriage earnings gap.
Media Coverage: tagesschau, Wirtschaftswoche, ZEIT Online, WDR aktuelle Stunde, N-TV
Work in Progress
Selected Policy Work
In: Kurzexpertise im Auftrag des Bundesministeriums der Finanzen im Rahmen des Forschungsauftrags fe 3/19
In: Kurzexpertise im Auftrag des Bundesministeriums der Finanzen im Rahmen des Forschungsauftrags fe 3/19
In: Fiscal Studies Volume 45, Issue3
In: Kurzexpertise im Auftrag des Bundesministeriums der Finanzen im Rahmen des Forschungsauftrags fe 3/19
In: Kurzexpertise im Auftrag des Bundesministeriums der Finanzen im Rahmen des Forschungsauftrags fe 3/19
In: EconPol Policy Brief, 2021, 40
In: ifo Schnelldienst, 2022, 75, Nr. 10, 36-40
In: ifo Schnelldienst, 2022, 75, Nr. 10, 41-46
In: IPOL in-depth Analysis
In: ifo Schnelldienst, 2021, 74, Nr. 10, 31-36