Is the Household Demand for In-Home Services Sensitive to Tax Reductions? The French Case

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Is the Household Demand for In-Home Services Sensitive to Tax Reductions? The French Case

Author Info

Flipo, Anne
Fougère, Denis
Olier, Lucile

Additional information is available for the following registered author(s):

Denis Fougere

Abstract

Our paper is concerned with the impact of tax reductions on the demand for services in the home. For that purpose, we consider the particular case of the French legislation voted in 1991. This law allows households employing paid help in the home to deduct from their income tax 50% of the sums paid out, subject to an annual ceiling. Did the reduction in overall cost of jobs in the form of services to individuals stimulate the household demand for these services? To analyse this problem, we estimate a structural model of demand for in-home services by using household individual data collected by INSEE (Paris) in 1996. Our estimations show that the relative marginal effect of a price variation on the probability of a strictly positive demand for in-home services is negative; its absolute value decreases with the educational level and with the income level of the household. It is generally higher for households without children less than 6 years old. These results suggest that a differentiated tax reduction, varying with the household income level and with the presence of young children in the household, should have a higher effect on the demand for in-home services than a uniform tax credit, such as the one granted in France since 1991.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2577.

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Date of creation: Oct 2000
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Handle: RePEc:cpr:ceprdp:2577

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Article
- Flipo, Anne & Fougere, Denis & Olier, Lucile, 2007. "Is the household demand for in-home services sensitive to tax reductions? The French case," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 365-385, February. [Downloadable!] (restricted)
Paper
- Flipo, Anne & Fougère, Denis & Olier, Lucile, 2004. "Is the Household Demand for In-Home Services Sensitive to Tax Reductions? The French Case," IZA Discussion Papers 1392, Institute for the Study of Labor (IZA). [Downloadable!]

Find related papers by JEL classification:
D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

References listed on IDEAS
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Susan L. Averett & H. Elizabeth Peters & Donald M. Waldman, . "Tax Credits, Labor Supply, and Child Care," University of Chicago - Population Research Center 92-9a, Chicago - Population Research Center.
Other versions:
- Averett, S.L. & Peters, H.E. & Waldman, D.M., 1992. "Tax Credits, Labor Supply, and Child Care," University of Chicago - Economics Research Center 92-9, Chicago - Economics Research Center.
- Susan L. Averett & H. Elizabeth Peters & Donald M. Waldman, 1997. "Tax Credits, Labor Supply, And Child Care," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 125-135, February. [Downloadable!] (restricted)
Jean Kimmel, 1998. "Child Care Costs As A Barrier To Employment For Single And Married Mothers," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 287-299, May. [Downloadable!] (restricted)
David M. Blau & Alison P. Hagy, 1998. "The Demand for Quality in Child Care," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 104-146, February. [Downloadable!] (restricted)
Gertler, Paul J & Waldman, Donald M, 1992. "Quality-Adjusted Cost Functions and Policy Evaluation in the Nursing Home Industry," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1232-56, December. [Downloadable!] (restricted)
Vassilis A. Hajivassiliou, 1991. "Simulation Estimation Methods for Limited Dependent Variable Models," Cowles Foundation Discussion Papers 1007, Cowles Foundation, Yale University. [Downloadable!]

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