I published here my "summer paper", a requirement of the ph.d program at the end of the second year. I studied the flat tax in Alberta, specifically the new increased basic and spouse amounts. I showed that the reform led to a tax cut for single individuals but an actual tax increase for married household (regarding the decision to work or not for the secondary earner). Using this fact, I use the tax reform as a test for the cooperation of husbands and wives. Here is the abstract. Enjoy my first ph.d-level paper!
This paper studies the effects of the 2001 Alberta tax reform and places the results within the collective labor supply framework. We focus on the increased basic and spouse amounts, a change that had opposite effects on single and married households regarding the decision to participate to the labor force. While the reform led to a tax cut for singles, married secondary earners were left facing a different choice. Individually, they actually got a tax cut, but because of the new increased value of the spouse tax credit, their decision could now increasesthe taxes of their husbands. By comparing the labor supply adjustments of this two groups using a quasi-natural experiment approach, we show that single women increase their participation while married one decreased it. We argue that it can be seen as evidence that husbands and wives play a cooperative game regarding labor supply decision. Specifically, we rationalize our findings by the fact that married women took into account the additional taxes liabilities their husbands would have to pay. We also study if the reform had some impacts on the bargaining power within the household. Looking at the share of expenditures spent on items linked to female consumption, we find one small but significant impact. This is also consistent with a cooperative game where the wives got back some of the money from the new tax credit.