Labor supply consequences of family taxation: Evidence from the Czech Republic

• New evidence on the labor supply effects of joint taxation of married couples.
• Joint taxation was introduced in the Czech Republic in 2005.
• The employment rate of married women with children dropped by 3 percentage points.
• The response was twice as large among women with tertiary-educated husbands.
• There was no effect on the employment probability of husbands.

While joint taxation is fairly widespread across European countries, the evidence of its labor supply effects is scarce due to a lack of recent policy changes. This study makes use of the introduction of joint taxation in the Czech Republic in 2005 to estimate its effect on married couples' labor supply. Results based on difference-in-differences and on triple differences with several alternative control groups suggest that the introduction of joint taxation lead to a decline of about 3 percentage points in the employment rate of married women with children. Participation declines are twice as large when the tax work disincentives are highest—among women with tertiary-educated husbands. The introduction of joint taxation did not affect the employment probability of married men with children.