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Wives, husbands and wheelchairs: Optimal tax policy under gender-specific health

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Author Info

  • Marie-Louise Leroux

    ()
    (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique)

  • Grégory Ponthière

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

Abstract

We study the optimal taxation problem in an economy composed of two-person households (men and women), where agents influence their own old-age dependency prospects through health spending. It is shown that the utilitarian social optimum can be decentralized by means of lump sum transfers from men to women, because women exhibit a higher disability-free life expectancy than men for a given level of health spending. Once self-oriented concerns for coexistence are introduced, the decentralization of the first-best requires also gender-specific subsidies on health spending aimed at internalizing the effect of each agent's health on the spouse's welfare. In the presence of singles in the population, the optimal policy requires also a differentiated subsidization of health spending for singles and couples. Finally, under imperfect observability of couples, the incentive compatibility constraints reinforce the need for subsidization of health spendings.

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Bibliographic Info

Paper provided by HAL in its series Working Papers with number halshs-00575059.

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Date of creation: Nov 2009
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Handle: RePEc:hal:wpaper:halshs-00575059

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Related research

Keywords: Long term care ; optimal taxation ; preventive health spending ; gender differentials ; old age dependency;

References

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  1. Apps, Patricia & Rees, Ray, 2007. "The Taxation of Couples," IZA Discussion Papers 2910, Institute for the Study of Labor (IZA).
  2. JOUSTEN, Alain & LIPSZYC, Barbara & MARCHAND, Maurice & PESTIEAU, Pierre, . "Long-term care insurance and optimal taxation for altruistic children," CORE Discussion Papers RP -1753, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Antoine Bommier & Marie-Louise Leroux & Jean-Marie Lozachmeur, 2010. "On the Public Economics of Annuities with Differential Mortality," CER-ETH Economics working paper series 10/135, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
  4. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  5. Helmuth Cremer & Jean-Marie Lozachmeur & Pierre Pestieau, 2007. "Income Taxation of Couples and the Tax Unit Choice," CESifo Working Paper Series 2005, CESifo Group Munich.
  6. d’ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe, 2009. "Household behavior and individual autonomy," CORE Discussion Papers 2009022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Blundell, Richard & Browning, Martin & Meghir, Costas, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," Review of Economic Studies, Wiley Blackwell, vol. 61(1), pages 57-80, January.
  8. LEROUX, Marie-Louise & PONTHIERE, Gregory, . "Optimal tax policy and expected longevity: a mean and variance utility approach," CORE Discussion Papers RP -2158, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2006. "The Optimal Income Taxation of Couples," CEPR Discussion Papers 5978, C.E.P.R. Discussion Papers.
  10. Nils Braakmann, 2009. "Other-regarding preferences, spousal disability and happiness: Evidence from German couples," Working Paper Series in Economics 130, University of Lüneburg, Institute of Economics.
  11. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthiere, 2009. "Should we Subsidize Longevity?," CESifo Working Paper Series 2614, CESifo Group Munich.
  12. Oswald, Andrew J. & Powdthavee, Nattavudh, 2008. "Does happiness adapt? A longitudinal study of disability with implications for economists and judges," Journal of Public Economics, Elsevier, vol. 92(5-6), pages 1061-1077, June.
  13. Marie-Louise Leroux & Pierre Pestieau & Grégory Ponthière, 2008. "Should we subsidize longevity?," Working Papers halshs-00586236, HAL.
  14. Gregory Ponthiere, 2007. "Measuring longevity achievements under welfare interdependencies: a case for joint life expectancy indicators," Social Indicators Research, Springer, vol. 84(2), pages 203-230, November.
  15. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
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