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

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Author Info

  • Flipo, Anne

    ()
    (CREST-INSEE)

  • Fougère, Denis

    ()
    (CREST)

  • Olier, Lucile

    ()
    (CREST-INSEE)

Abstract

Our paper examines the impact of tax reductions on the demand for services in the home. For that purpose, we estimate a structural model of demand for such services by using household individual data collected by INSEE (Paris) in 1996. In this model, the net hourly wage paid to the domestic employee, the household preferences for consumption of in-home services and the decision to take advantage of the tax reduction are considered as endogenous variables. Estimation of the econometric model uses the fact that some households are observed to consume domestic services and to take advantage of the tax reduction, while others either consume such services but do not take advantage of the tax reduction, or do not consume these services at all. Its identification relies on an exclusion restriction resulting from the tax credit schedule. Results show that the probability of consuming in-home services increases with age and income. A ten per cent increase in the tax reduction would increase from 45.9 to 50.8 per cent the proportion of households benefiting from the tax reduction among those who consume paid in-home services. Moreover, 13.5 per cent of households who do not actually consume such services would do so after the ten per cent increase in the tax reduction. These simulated variations would mainly concern high-income households.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1392.

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Length: 32 pages
Date of creation: Nov 2004
Date of revision:
Publication status: published in: Journal of Public Economics, 2007, 91 (1-2), 365-385
Handle: RePEc:iza:izadps:dp1392

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Keywords: services in the home; tax reduction; household demand; labor cost;

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  1. Vassilis A. Hajivassiliou, 1991. "Simulation Estimation Methods for Limited Dependent Variable Models," Cowles Foundation Discussion Papers 1007, Cowles Foundation for Research in Economics, Yale University.
  2. 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.
  3. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
  4. 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.
  5. Didier Blanchet, 1994. "Transferts fiscaux, répartition du revenu et équilibre des emplois de service," Économie et Prévision, Programme National Persée, vol. 115(4), pages 85-91.
  6. Thomas Piketty, 1998. "L'emploi dans les services en France et aux États-Unis : une analyse structurelle sur longue période," Économie et Statistique, Programme National Persée, vol. 318(1), pages 73-99.
  7. 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.
  8. Nyman, John A & Bricker, Dennis L, 1989. "Profit Incentives and Technical Efficiency in the Production of Nursing Home Care," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 586-94, November.
  9. 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.
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Cited by:
  1. Stancanelli, Elena G. F. & Stratton, Leslie S., 2010. "Her Time, His Time, or the Maid's Time: An Analysis of the Demand for Domestic Work," IZA Discussion Papers 5253, Institute for the Study of Labor (IZA).
  2. Ali Fakih & Walid Marrouch, 2013. "Who hires foreign domestic workers? Evidence from Lebanon," CIRANO Working Papers 2013s-36, CIRANO.
  3. Fakih, Ali & Marrouch, Walid, 2012. "Determinants of Domestic Workers' Employment: Evidence from Lebanese Household Survey Data," IZA Discussion Papers 6822, Institute for the Study of Labor (IZA).

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