State Effects on Market Stratification: Pre- and Post-tax Fatherhood Premia among Men in Four Countries

• In Event: 199 - Section on Inequality, Poverty and Mobility Paper Session. Parenthood, Marriage, and Divorce Penalties and Premiums

Abstract

Men often receive fatherhood earnings bonuses, the size of which differs among men. Stratification also differs across countries, so we compare pre- and post-tax fatherhood premia in the Netherlands, West Germany, the United Kingdom, and the United States. The countries differ in their institutional supports for market wage inequality, as well as the extent to which tax systems reduce or sustain earnings inequalities. Wave 6 (2004) LIS data and regressions of the recentered influence function are used to estimate the unconditional quantile partial effects of children at different percentiles of men’s absolute earnings distribution in each country. The size of the fatherhood premium varies most among men in the less-regulated labor markets of the two English-speaking countries. The lowest-earning UK and US men with three or more children are predicted to incur significant penalties. Fatherhood premia emerge in the upper half of the earnings distribution that increase as UK and US men’s earnings increase. Premia also increase as West German men’s earnings increase, but all German fathers are predicted to earn some premium. All Dutch fathers earn a small premium that is of similar magnitude at each percentile of the gross earnings distribution. The German, UK, and US tax systems have little redistributive effect, although the US (but not UK) penalty for the lowest-earning fathers disappears after taking taxes into account. The Dutch tax system further equalizes the already similar premia among men. Findings highlight the importance of state-market arrangements in structuring family-related earnings equality among men.

Author

• Lynn Prince Cooke, University of Bath