Skip to main content

Advertisement

Log in

Work or housework? Mincer’s hypothesis and the labor supply elasticity of married women in Japan

  • Article
  • Published:
The Japanese Economic Review Aims and scope Submit manuscript
  • 2 Altmetric

Abstract

Married women exhibit more elastic labor supply responses to wage changes than do single women or men. Mincer (Aspects of labor economics, Princeton University Press, Princeton, 1962) argued that this is explained by a high elasticity of substitution between market work and home production. To test this hypothesis, I use a sharp change in Japanese tax rates to estimate labor supply and home production elasticities for Japanese workers. The results support Mincer's hypothesis: market and home production are near-perfect substitutes for married Japanese women, while home production effects are modest for other demographic groups. These results contrast with those for the USA, where male and female elasticities have been converging.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. The elasticity of labor supply for married women is reported to range from 0.27 to 2.40 (Cogan 1981; Hausman 1985; Arrufat and Zabalza 1986; Arellano and Meghir 1992; Eissa and Hoyens 2004; Blau and Kahn 2007) and for married men from −0.24 to 0.10 (Blundell and Walker 1986; MaCurdy et al. 1990; Devereux 2004; Eissa and Hoyens 2004; Bessho and Hayashi 2005; Blau and Kahn 2007), single men from 0.12 to 0.25 (Pencavel 2002), and single women from 0.08 to 0.14 (Bargain and Orsini, 2006). Using Japanese data, the elasticity of labor supply for married women in Japan is also reported to be higher than that for men and single women (Shimada and Sakai 1980; Hill 1984; Shimada and Higuchi 1985; Yamada and Yamada 1986; Takayama and Arita 1992; Ogawa and Ermisch 1996; Asano 1997; Yamada et al. 1999; Bessho and Hayashi 2005, 2014, 2015; Akabayashi 2006; Kuroda and Yamamoto 2008).

  2. Under the Japanese tax system, income tax is zero if employment income is less than 1.03 million yen because of the employed income deduction (0.65 million yen) and the basic deduction (0.38 million yen). Consequently, many married women adjust their working hours in order to earn less than 1.03 million yen, a phenomenon known as “the wall of 1.03 million yen”. In addition, under the Japanese social security system, the wife of a salaried worker or public servant does not pay a social insurance premium if her employment income is less than 1.30 million yen because she is regarded as a dependent of her husband. Therefore, many married women also adjust their working hours in order to earn less than 1.30 million yen, a phenomenon known as “the wall of 1.30 million yen”.

  3. These deductions are subtracted from the husband’s earnings if the wife’s earnings are less than 1.03 million yen and 1.41 million yen. It is said that these are the most crucial disincentives for married women to increase hours worked.

  4. When working hours increase, the progressive tax rate increases, which negatively affects the after-tax wage produces a negative relationship between working hours and after-tax wages.

  5. In Japan, a self-employed person must also join the national health insurance system. However, due to the restrictions we place on our data, we cannot obtain the data for national health insurance premiums, and so it is instead calculated by the same computation as that for the health insurance premium

  6. The age of youngest child variable was divided into four groups: those with youngest child aged 0–3, 4–5, 6–11, and 12–15.

References

  • Abe, Y., & Ohtake, F. (1995). A tax and social security system and the labor supply behavior of part-time worker. Kikan Shakai Hosho Kenkyu,31(2), 120–134. (in Japanese).

    Google Scholar 

  • Aguiar, M., Hurst, E., & Karabarbounis, L. (2013). Time use during the great recession. American Economic Review,103(5), 1664–1696.

    Article  Google Scholar 

  • Akabayashi, H. (2003). A social security system and a tax system and the labor supply of married women. In The social security system of the time of choice (pp. 113–133). National Institute of Population and Security Research, The University of Tokyo Press (in Japanese).

  • Akabayashi, H. (2006). The labor supply of married women and spousal tax deductions in Japan—A structural estimation. Review of Economics of the Household,4(4), 349–378.

    Article  Google Scholar 

  • Arellano, M., & Meghir, C. (1992). Female labor supply and on-the-job search: An empirical model estimated using complementary data sets. The Review of Economic Studies,59(3), 537–559.

    Article  Google Scholar 

  • Arrufat, J. L., & Zabalza, A. (1986). Female labor supply with taxation, random preferences, and optimization errors. Econometrica,54(1), 47–63.

    Article  Google Scholar 

  • Asano, S. (1997). Joint allocation of leisure and consumption commodities: A Japanese extended consumer demand system 1979—1990. Japanese Economic Review,48(1), 65–80.

    Article  Google Scholar 

  • Attanasio, O., & MaCurdy, T. (1997). Interactions in family labor supply and their implications for the impact of the EITC. Mimeograph. Stanford: Stanford University.

    Google Scholar 

  • Bargain, O., & Orsini, K. (2006). In-work policies in Europe: Killing two birds with one stone? Labour Economics,13(6), 667–697.

    Article  Google Scholar 

  • Bessho, S., & Hayashi, M. (2005). Economic studies of taxation in Japan: The case of personal income taxes. Journal of Asian Economics,16(6), 956–972.

    Article  Google Scholar 

  • Bessho, S., & Hayashi, M. (2014). Intensive margins, extensive margins, and spousal allowances in the japanese system of personal income taxes: A discrete choice analysis. Journal of the Japanese and International Economies,34, 162–178.

    Article  Google Scholar 

  • Bessho, S., & Hayashi, M. (2015). Should the Japanese tax system be more progressive? An evaluation using the simulated SMCFs based on the discrete choice model of labor supply. International Tax and Public Finance,22(1), 144–175.

    Article  Google Scholar 

  • Blau, F. D., & Kahn, L. M. (2007). Changes in the labor supply behavior of married women: 1980–2000. Journal of Labor Economics,25(3), 393–438.

    Article  Google Scholar 

  • Blundell, R., Chiappori, P. A., Magnac, T., & Meghir, C. (2007). Collective labour supply: Heterogeneity and non-participation. The Review of Economic Studies,74(2), 417–445.

    Article  Google Scholar 

  • Blundell, R., Duncan, A., & Meghir, C. (1998). Estimating labor supply responses using tax reforms. Econometrica,66(4), 827–861.

    Article  Google Scholar 

  • Blundell, R., & Walker, I. (1986). A life-cycle consistent empirical model of family labor supply using cross-section data. The Review of Economic Studies,53(4), 539–558.

    Article  Google Scholar 

  • Cherchye, L., De Rock, B., & Vermeulen, F. (2012). Married with children: A collective labor supply model with detailed time use and intra-household expenditure information. American Economic Review,102(7), 3377–3405.

    Article  Google Scholar 

  • Cogan, J. (1981). Fixed costs and labor supply. Econometrica,49(4), 945–963.

    Article  Google Scholar 

  • Devereux, P. J. (2004). Changes in relative wages and family labor supply. Journal of Human Resources,39(3), 698–722.

    Article  Google Scholar 

  • Eissa, N., & Hoyens, H. W. (2004). Taxes and the labor market participation of married couples: The earned income tax credit. Journal of Public Economics,88(9–10), 1931–1958.

    Article  Google Scholar 

  • Eissa, N., Kleven, H. J., & Kreiner, C. T. (2008). Evaluation of four tax reforms in the United States: Labor supply and welfare effects for single mothers. Journal of Public Economics,92(3), 795–816.

    Article  Google Scholar 

  • Gelber, A. M., & Mitchell, J. W. (2011). Taxes and time allocation: Evidence from single women and men. The Review of Economic Studies,79(3), 863–897.

    Article  Google Scholar 

  • Hausman, J. A. (1985). Taxes and labor supply. Handbook of Public Economics,1, 213–263.

    Article  Google Scholar 

  • Hausman, J. A., & Ruud, P. (1984). Family labor supply with taxes. American Economic Review,74(2), 242–248.

    Google Scholar 

  • Higuchi, Y. (1995). The consequence of protectionism of a full-time housewife. In Hatta & Yahiro (Eds.), The economic analysis of the protectionism of the weak(in Japanese).

  • Hill, M. A. (1984). Female labor force participation in Japan: An aggregate model. Journal of Human Resources,19(2), 280–287.

    Article  Google Scholar 

  • Kooreman, P., & Kapteyn, A. (1986). Estimation of rationed and unrationed household labour supply functions using flexible functional forms. The Economic Journal,96(382), 398–412.

    Article  Google Scholar 

  • Kuroda, S., & Yamamoto, I. (2008). Estimating frisch labor supply elasticity in Japan. Journal of the Japanese and International Economies,22(4), 566–585.

    Article  Google Scholar 

  • Lee, J., Kawaguchi, D., & Hamermesh, D. S. (2012). Aggregate impacts of a gift of time. American Economic Review Papers and Proceedings,102(3), 612–616.

    Article  Google Scholar 

  • Lucas, R. E. (1976). Econometric policy evaluation: A critique. Carnegie-Rochester Conference Series on Public Policy,1, 19–46.

    Article  Google Scholar 

  • MaCurdy, T. (1983). A simple scheme for estimating an intertemporal model of labor supply and consumption in the presence of taxes and uncertainty. International Economic Review,24(2), 265–289.

    Article  Google Scholar 

  • MaCurdy, T., Green, D., & Paarsch, H. (1990). Assessing empirical approaches for analyzing taxes and labor supply. Journal of Human Resources,25(3), 415–490.

    Article  Google Scholar 

  • Mincer, J. (1962). Labor force participation of married women: A study of labor supply. In Aspects of labor economics (pp. 63–105). Princeton: Princeton University Press.

  • Ogawa, N., & Ermisch, J. F. (1996). Family structure, home time demands, and the employment patterns of Japanese married women. Journal of Labor Economics,14(4), 677–702.

    Article  Google Scholar 

  • Pencavel, J. (2002). A cohort analysis of the association between work hours and wages among men. Journal of Human Resources,37(2), 251–274.

    Article  Google Scholar 

  • Ransom, M. R. (1987). An empirical model of discrete and continuous choice in family labor supply. The Review of Economics and Statistics,69(3), 465–472.

    Article  Google Scholar 

  • Shimada, H., & Higuchi, Y. (1985). An analysis of trends in female labor force participation in Japan. Journal of Labor Economics,3(1), S355–S374.

    Article  Google Scholar 

  • Shimada, H., & Sakai, Y. (1980). Analysis of labor force structure and employment behavior: Cross-sectional analysis of employment behavior of household through microdata. Economic Analysis,79, 1–87.

    Google Scholar 

  • Takahashi, S. (2010). An estimation of the work disincentive effects of the spousal deduction and the social security systems on the labor supply of Japanese married women. Japan Labor Review,52, 28–43.

    Google Scholar 

  • Takayama, N., & Arita, F. (1992). Finances of the double-income household and employment selection of wives. Japan Economic Research,22, 19–45.

    Google Scholar 

  • Yamada, K. (2008). Estimating labor supply and time allocation by married Japanese men and unmarried Japanese women. Applied Economics Letters,15(9), 659–666.

    Article  Google Scholar 

  • Yamada, K. (2011). Intertemporal substitution in the time allocation of married women. Research Collection School Of Economics, pp. 1–26. https://ink.library.smu.edu.sg/soe_research/1247.

  • Yamada, T., & Yamada, T. (1986). Fertility and labor force participation of married women: Empirical evidence from the 1980 population census of Japan. Quarterly Review of Economics and Business,26(2), 35–46.

    Google Scholar 

  • Yamada, T., Yamada, T., & Kang, J. M. (1999). A study of time allocation of Japanese households. Japan and the World Economy,11(1), 41–55.

    Article  Google Scholar 

  • Yokoyama, I. (2015). The impact of tax reform in Japan on the work-hour and income distributions of married women. Discussion papers; No. 2015-02, Graduate School of Economics, Hitotsubashi University.

Download references

Acknowledgements

I thank two anonymous referees and journal editor for their detailed comments. Deepest appreciation is expressed to my advisor, Daiji Kawaguchi, for his continued guidance and support, and I am also grateful to Ryo Kambayashi, Izumi Yokoyama, Ken Yamada, Taiyo Fukai, and seminar participants at Hitotsubashi University and Niigata University for their useful comments and discussions from which this study has greatly benefitted. This research is supported by the Resampling Data Usage Promotion Program of Hitotsubashi University. Editing service was provided by Philip MacLellan. Any errors and omissions remain the responsibility of the author.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Kiho Muroga.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Appendices

Appendices

1.1 A-1: Average tax rates and hours allocated to each activity

In this section, we calculated the average tax rates and hours allocated to each activity by year, years of schooling, and age (Tables 12, 13, 14, 15, 16).

Table 12 Average marginal tax rate (%)
Table 13 Average working hours per week
Table 14 Average household hours per week
Table 15 Average leisure hours per week
Table 16 Average maintenance hours per week

1.2 A-2: Results of regressions including entire information

Tables 17, 18, 19 and 20 present the comprehensive results of additional regressions for each of the four time-use variables that allow us to assess whether or not the several potential sources of endogeneity discussed above are present. For each table, column (1) presents again for comparison the summary results shown earlier in Table 7. Column (2) shows estimation results without correcting for the potential endogeneity of workforce participation, and column (3) the results without correcting for eliminating observations near the tax kink. Column (4) shows the results without controlling for endogeneity of after-tax wages and other income, and column (5) the results from the unabridged analysis sample in which observations within the tax kink are not excluded. Column (6) shows the results of estimates of the larger, unabridged sample without correcting for endogeneity.

Table 17 Regression results (working hours per week)
Table 18 Regression results (household hours per week)
Table 19 Regression results (leisure hours per week)
Table 20 Regression results (maintenance hours per week)

Tables 17 and 18 present the results for working and household hours, respectively. The similarity of the estimates in columns (1) and (2) allows us to conclude that sample selection bias of participation in market work is not salient in our data. The coefficient of the log of after-tax wage in column (3) is larger than that of columns (1) and (2), indicating that sample selection bias caused by excluding samples in the kink is significant. The coefficients in column (4) from OLS regressions are smaller than those of the IV coefficients, which indicates that endogeneity exists in the after-tax wage; that is, there is a negative correlation between working hours and after-tax wage, as described earlier. Specifically, when market working hours increase, both income tax and residency tax rates increase, which creates a negative effect on after-tax wages. This bias originating from the correlation between after-tax wage and working/household hours supports the decision to correct for this endogeneity using either an IV or the control approach used in this study. The coefficients in columns (5) and (6) using the unabridged sample show significance as they do with our analysis sample, with the coefficients slightly larger than that of columns (1) and (2) in absolute value. This is consistent with common knowledge that observations in the kink are susceptible to the change of after-tax wage.

Tables 19 and 20 display the regression results for leisure and maintenance hours. The coefficients are not statistically significant except for column (4) of Table 19, which indicates endogeneity in the after-tax wage. In summary, then, a change in after-tax wages does not statistically affect leisure hours and maintenance hours.

1.3 A-3: Results of regressions for single women

Tables 21, 22, 23 and 24 present the full estimation results for the time allocation changes of single women. These are summarized in Table 9 of the main text.

Table 21 Results for single women (working hours per week)
Table 22 Results for single women (household hours per week)
Table 23 Results for single women (leisure hours per week)
Table 24 Results for single women (maintenance hours per week)

1.4 A-4: Results of regressions for part-time workers

Tables 25, 26, 27 and 28 present the full estimation results for the time allocation changes of part-time workers. They are summarized in Table 10 of the main text.

Table 25 Results for part-time workers (working hours per week)
Table 26 Results for part-time workers (household hours per week)
Table 27 Results for part-time workers (leisure hours per week)
Table 28 Results for part-time workers (maintenance hours per week)

1.5 A-5: Results of regressions for full-time workers

Tables 29, 30, 31 and 32 present the full estimation results for the time allocation changes of full-time workers. They are summarized in Table 11 of the main text.

Table 29 Results for full-time workers (working hours per week)
Table 30 Results for full-time workers (household hours per week)
Table 31 Results for full-time workers (leisure hours per week)
Table 32 Results for full-time workers (maintenance hours per week)

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Muroga, K. Work or housework? Mincer’s hypothesis and the labor supply elasticity of married women in Japan. JER 71, 303–347 (2020). https://doi.org/10.1007/s42973-019-00017-8

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s42973-019-00017-8

Keywords

JEL classification

Navigation