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Economic incentives, home production, and gender identity norms

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Andrea Ichino, Martin Olsson, Barbara Petrongolo, Peter Skogman Thoursie 11 September 2019 Gender identity norms are possible drivers of persistent gender inequalities in the labour market, but the extent to which such norms restrict the behaviour of couples is debated. This column examines how households in Sweden changed their allocation of home production in response to the introduction of a tax credit that altered the marginal tax rates (and the relative take-home pay) in different ways for spouses in couples. It finds that immigrant couples, who tend to come from countries with more traditional gender norms than Sweden, responded more strongly to a reduction in the husband’s tax rate than the wife’s. By not responding to wives’ tax cuts, these

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Andrea Ichino, Martin Olsson, Barbara Petrongolo, Peter Skogman Thoursie 11 September 2019

Gender identity norms are possible drivers of persistent gender inequalities in the labour market, but the extent to which such norms restrict the behaviour of couples is debated. This column examines how households in Sweden changed their allocation of home production in response to the introduction of a tax credit that altered the marginal tax rates (and the relative take-home pay) in different ways for spouses in couples. It finds that immigrant couples, who tend to come from countries with more traditional gender norms than Sweden, responded more strongly to a reduction in the husband’s tax rate than the wife’s. By not responding to wives’ tax cuts, these couples may forgo as much as £2,000 per year in household disposable income.

Gender identity norms such as the male-bread-winner model are possible drivers of persistent gender inequalities in the labour market (Akerlof and Kranton 2000, Bertrand 2010). However, the extent to which they restrict the behaviour of couples is debated (e.g. Fernandez et al. 2004, Fortin 2005, Bertrand et al. 2015, Bursztyn et al. 2017, 2018, Folke and Rickne, 2019).  While the simple observation of men’s and women’s specialisation in market and domestic work may be revealing of gender identity norms, the observed time allocation of spouses may also be a consequence of gender-wage gaps in the labour market. 

Suppose, for example, we observe a couple in which the wife mostly works at home and the husband mainly works in the market. Even if the couple had a preference for equal gender roles, theirs would appear as a traditional setup because, in the presence of wage gaps, household resources are maximised when the wife stays at home.

We argue that a more informative test of the role of binding gender norms requires measuring instead whether and how the allocation of home production between spouses changes after a change in the financial cost of adopting gendered norms (Ichino et al. 2019). This happens when spouses’ relative wages change for some exogenous reason outside a couple’s control. 

Ideally, one would like to run an experiment in which, for example, female wages increase in a randomly selected group of couples, compared with an ex ante similar group in which male wages increase instead. Suppose that in the first group, the allocation of home production stays unchanged, while in the second, more home production is loaded on the wives. Such a finding would indicate that couples in this population are willing to ‘leave money on the table’ in order not to load husbands with more home production, even when it would be financially convenient for the household, but that they are ready to load more home production on wives when this becomes financially convenient. This would be evidence of a binding traditional identity norm. Vice versa: if the second group reacts and the first one does not, this would be evidence of a binding untraditional norm, prescribing that more home production can be loaded on husbands, but not on wives.

While we cannot run this experiment, we can exploit, as a quasi-experiment, the introduction in 2007 of an earned income tax credit in Sweden, which altered in different ways the marginal tax rates (and the relative take-home pay) of spouses in couples that were arguably similar ex ante.

We combine variation in tax cuts driven by the reform with information on how spouses adjusted their home-production time as a reaction to the reform. We use a proxy of home-production time available in Swedish administrative data sources, given by the take-up of temporary parental leave to care for a sick child during regular working hours. We show that fathers’ share of temporary parental leave is positively and significantly correlated to their share of overall home production in a subset of couples in which we have information on both indicators.

We explore variation in behaviour across the universe of Swedish resident couples, who may abide by different (and differently binding) gender norms, and we detect evidence of both traditional and untraditional norms in different subgroups of the population. 

We find that the allocation of home production among immigrant couples responds more strongly to a reduction in the husband’s than the wife’s tax rate, while the respective allocation among native couples responds symmetrically to either wives’ or husbands’ tax cuts. Native couples are equally likely to have husbands or wives spend longer hours in the home when economic incentives push in a certain direction, but immigrant couples hardly respond to incentives for wives to work more in the market and husbands to work more in the home. 

We interpret this as evidence that immigrant couples in Sweden – on average originating from countries with more traditional gender norms than Sweden – behave more traditionally in their time allocation decisions than native couples. By not responding to wives’ tax cuts, simple calculations based on their opportunity cost of home production show that traditional couples may forgo as much as £2,000 per year in household disposable income.

Our estimated response to tax cuts also varies depending on other characteristics of the couple: for example, which spouse is the primary breadwinner, whether couples are married or cohabitating, or whether their children are boys or girls. We find that male-breadwinner couples, married couples, and couples with a first-born son tend to react more strongly to a reduction in the husband’s tax rate, while the respective counterpart couples tend to react more strongly to a reduction in the wife’s tax rate. The interpretation is that the first set of couples behaves more traditionally than the second set.

Couples who behave more traditionally are more likely to exacerbate gender disparities in childcare time when incentives push in that direction, while they are not as responsive to incentives that would induce a more equal gender division of labour. Untraditional couples are instead more willing to respond to economic incentives whenever they lead to a more equal gender division of labour. 

These findings should inform the design of policies aimed at incentivising female participation to the labour market, as the labour supply impact of tax incentives would vary with the type and strength of gender norms in the affected population.

References

Akerlof, G and R Kranton (2000), “Economics and Identity”, Quarterly Journal of Economics 115 (3): 715–753.

Bertrand, M (2010), “New Perspectives on Gender”, in O Ashenfelter and D Card (eds), Handbook of Labor Economics, Volume 4B, North Holland, pp. 1545–1592.

Bertrand, M, E Kamenica, and J Pan (2015), “Gender Identity and Relative Income within Households”, Quarterly Journal of Economics 130(2): 571–614.

Bursztyn, L, T Fujiwara, and A Pallais (2017), “Acting Wife: Marriage Market Incentives and Labor Market Investments”, American Economic Review 107(11): 3288–3319. 

Bursztyn, L, A Gonzalez and D Yanagizawa-Drott (2018), “Misperceived Social Norms: Female Labor Force Participation in Saudi Arabia”, mimeo.

Fernandez, R, A Fogli, and C Olivetti (2004), “Mothers and Sons: Preference Formation and Female Labor Force Dynamics”, Quarterly Journal of Economics 119(4): 1249–1299.

Folke, O and J Rickne (2019), “All the Single Ladies: Job Promotions and the Durability of Marriage”, American Economic Journal: Applied Economics, forthcoming.

Fortin, N (2005), “Gender Role Attitudes and Women’s Labour Market Outcomes Across OECD Countries”, Oxford Review of Economic Policy 21(3): 416–438. 

Ichino, A, M Olsson, B Petrongolo and P S Thoursie (2019), “Economic incentives, home production and gender identity norms”, CEPR Discussion Paper DP13769.

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