Tax and transfer policy and female labor supply

The Tax Reform Act of 1986 (TRA86) reduced the top marginal tax rate by 44 percent (from 50 percent to 28 percent), but changed less the marginal tax rate for individuals further down the income distribution. In chapter 1 of this thesis, I use TRA86 as a natural experiment to identify the labor supply responsiveness of married women to changes in the tax rate. I identify the tax effect as the difference between the change in labor supply of women with large tax rate reductions and the change in labor supply of women with small tax rate reductions. I find evidence that TRA86 led to an increase in the labor supply of high-income, married women. At least half the response is due to increased labor force participation. This result is robust to several alternative explanations.;The second chapter of this thesis is joint work with Jeffrey Liebman of Harvard University. This chapter uses the 1987 expansion of the Earned Income Tax Credit (EITC), and asks whether this expansion affected labor force participation and hours of work of unmarried women with children. We find that the 1987 expansion of the EITC increased the labor force participation but did not affect the hours of work of single women with children who were already in the labor force. We conclude that compared to other elements of the welfare system, the EITC appears to produce little distortion of work incentives.;The third chapter examines the labor supply response of married women to another tax law, the Economic Recovery Tax Act of 1981 (ERTA). I estimate difference-in-difference and traditional regression models of labor supply to evaluate the responsiveness of labor force participation and hours of work to tax changes. I find weak evidence that labor force participation by upper-income, married women increased in response to ERTA, but no evidence that hours of work for working women responded. Estimates of traditional labor supply models predict participation and hours of work responses for upper-income women that are at the lower end of the observed responses. A likely explanation for this divergence is measurement error in the after-tax wage.