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On the optimality of joint taxation for noncooperative couples

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  • Meier, Volker
  • Rainer, Helmut

Abstract

We present a noncooperative model of a family's time allocation between work and a home-produced public good, and examine whether the income tax should apply to couples or individuals. While tax-induced labor supply distortions lead to overprovision of the public good, spouses' failure to internalize the collective effect of their choices points towards underprovision. A large parameter range exists for which a move from individual to joint taxation improves the welfare of both spouses. The source of Pareto-improvement consists in moving the level of the public good closer to its first-best, while an adjustment of intra-family transfers compensates the secondary earner for the increased tax load.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 4 ()
Pages: 633-641

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Handle: RePEc:eee:labeco:v:19:y:2012:i:4:p:633-641

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Individual taxation; Joint taxation; Household production; Public goods;

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References

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  1. Apps,Patricia & Rees,Ray, 2009. "Public Economics and the Household," Cambridge Books, Cambridge University Press, number 9780521716284, 9.
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  4. Meier, Volker & Wrede, Matthias, 2013. "Reducing the excess burden of subsidizing the stork: Joint taxation, individual taxation, and family tax splitting," Munich Reprints in Economics, University of Munich, Department of Economics 19213, University of Munich, Department of Economics.
  5. Vicky Barham & Rose Anne Devlin, 2004. "A Theory of Rational Marriage and Divorce," Working Papers, University of Ottawa, Department of Economics 0405E, University of Ottawa, Department of Economics.
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  13. Helmut Rainer, 2005. "Should We Write Prenuptial Contracts?," Discussion Paper Series, Department of Economics, Department of Economics, University of St. Andrews 200514, Department of Economics, University of St. Andrews.
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Citations

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Cited by:
  1. Paula GOBBI, 2013. "Childcare and Commitment within Households," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013019, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  2. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics, Economic Studies, University of Dundee 236, Economic Studies, University of Dundee.
  3. Volker Meier, 2010. "One-Sided Private Provision of Public Goods with Implicit Lindahl Pricing," CESifo Working Paper Series 3295, CESifo Group Munich.
  4. Volker Meier & Matthias Wrede, 2008. "Reducing the Excess Burden of Subsidizing the Stork: Joint Taxation, Individual Taxation, and Family Tax Splitting," CESifo Working Paper Series 2470, CESifo Group Munich.
  5. Volker Meier & Helmut Rainer, 2012. "Beyond Ramsey: Gender-Based Taxation with Non-Cooperative Couples," CESifo Working Paper Series 3966, CESifo Group Munich.
  6. Volker Meier & Helmut Rainer, 2014. "Pigou Meets Ramsey: Gender-Based Taxation with Non-Cooperative Couples," Ifo Working Paper Series Ifo Working Paper No. 179, Ifo Institute for Economic Research at the University of Munich.
  7. Hans Fehr & Manuel Kallweit & Fabian Kindermann, 2013. "Reforming Family Taxation in Germany - Labor Supply vs. Insurance Effects," CESifo Working Paper Series 4386, CESifo Group Munich.

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