Abstract

This paper quantifies the distributional and labour supply effects of moving from Ireland’s current hybrid
joint/individual income tax system to full individualisation. The Irish system allows married couples to
share tax bands and credits, which lowers tax liabilities for one-earner couples but can generate substantial
disincentives for secondary earners—typically women—through high marginal effective tax rates. We combine
the SWITCH tax-benefit microsimulation model with an estimated discrete choice labour supply model for
married couples. First, we simulate the mechanical distributional effects of full individualisation and show
that disposable income losses increase with household income. We then incorporate behavioural responses and find that individualisation raises married women’s labour supply, while slightly reducing married men’s hours through intra-household substitution. As a robustness exercise, we develop an earnership-based specification that assigns primary and secondary roles using predicted earnings potential. This comparison shows that the effects of individualisation are not purely mechanical responses to earnership-related incentives, pointing to an additional role for gender-correlated constraints beyond relative earnings position.

location: 

University Évry Paris-Saclay, room Malinvaud (312), bâtiment Ile-de-France