Taxes and Marriage: A Two-Sided Search Analysis

Hector Chade, Arizona State University
Gustavo Ventura, University of Western Ontario

Abstract

This paper analyzes the effects that differential tax treatment of married and single individuals has on marriage behavior, using a version of the two-sided search model of Burdett-Wright (1998). The main results are the following: i) an increase in the 'marriage tax' reduces the number of marriages; ii) an indirect strategic effect due to two-sided search considerations mitigates the impact that changes in the 'marriage tax' have on marriage formation; iii) the quantitative analysis of the model indicate that, in the US, large increases in the 'marriage tax' are associated with small changes in the number of marriages.