Alberto Alesina and Andrea Ichino have a simple proposal: men and women should face different tax rates.
Here is a policy proposal that should make the two camps agree: reduce income taxes on women and increase, by less, income taxes on men in a way that holds total tax revenue constant. This policy would simultaneously reduce overall tax distortions and increase womenâ€™s participation in the labour force, thus achieving the goals of quotas and affirmative action but in a more efficient way. While quotas impose quantitative constraints that prevent agents from equalizing costs and benefits at the margin, gender-based taxation changes relative prices but lets agents free to optimize at the margin. For those who believe that women should not face discrimination gender-based taxation should be attractive; it is â€œfairâ€ to compensate women for the fact they bear the brunt of maternity and early child care costs and this harms their career prospects. Gender based taxation offers a form of compensation that helps redress these inequalities in a less distortionary, more transparent and simpler way that affirmative action quotas.
I find it hard to argue with this one on economic grounds. As they point out, it’s a straightforward application of the Ramsey Rule – goods with more elastic supply should be taxed at a lower rate. “Every study we know in many different countries finds that the elasticity of womenâ€™s labour supply is much higher than that of men. In fact the latter is often found to be close to zero, while that of women is often close to 1.”
Now, who’s going to be the first politician to propose it?
(HT: Jeremy Lawson, who drew my attention to the VoxEU blog, now added to the blogroll)