The impacts of the 1988 tax reform on married women's labour supply in Canada

Canadian income tax rates changed considerably during the late 80’s and early 90’s; however, the effects of Canadian personal income tax reforms on labour supply have not been widely studied, particularly in comparison to personal income tax reforms in the US.1 This paper studies the effect of Canadian tax reform in 1988 on the labour supply of married women and places those effects in the context [...] McCaffery in his book Taxing Women (1997), examines the effects of taxation on the labour decisions of women in the US, and argues that the US tax system distorts the labour decisions of women in the US. [...] An outline of the remainder of the chapter is as follows: in section 2, I describe in detail the expected impact of the Canadian federal tax reform of 1988 on lower income married women’s labour supply in Canada. [...] In contrast, under the tax system prior to 1988, the effective marginal tax rate of the lower-income spouse was the same as the effective marginal income tax rate of the (higher income) tax-filing spouse. [...] I, therefore, identify the impact of the federal tax reform in 1988 on the labour supply decisions of dependent-married women as the difference between the change in labour supply of women who face large reductions in the effective marginal income tax rate (the treatment group) and the change in labour supply of women who face relatively small reductions in the effective marginal income tax rate (