On labor force participation of married women: The case of the United States since 1959

Labor force participation of married females has more than doubled since 1959. During the same period, tax laws have undergone numerous changes; with major reforms taking place in the 1980's that effectively flattened the tax schedule.; In the first part of this thesis we study the impact of changes in tax laws on labor force participation of married women. We use a model of heterogeneous agents with discrete work choice in order to quantitatively assess the impact of income tax reforms on the observed patterns of married couples' labor supply. Tax Simulator Software provided by NBER is used in conjunction with IRS Income Statistics to compute income and FICA taxes for each married couple in the model. Our main finding is that changes in tax laws account for 16.25% of the increase in the proportion of two earner couples in the 1980s but cannot account for the observed patterns in the other decades.; In the second part of this thesis we study the relative importance of two factors in accounting for the change in LFP of married women: changes in the joint distribution of couples' potential wages and the decline in prices of home appliances. We use a model with heterogeneous agents, which allows for the investigation of cross-sectional implications of the factors examined. The key finding is that changes in the distribution of potential wages can account for 88% of the observed increase in the labor supply of married females and in a manner consistent with some cross-sectional properties of the female labor supply that we document using the U.S. Census data. This result is due mainly to the closing of the gender wage differential, as opposed to changes in matching patterns or within gender inequality. Further, the decline in prices of home appliances has an effect in the right direction, but this effect is quantitatively small, accounting for 5% of the rise in female labor force participation.