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Income Taxation in an Empirical Collective Household Labour Supply Model with Discrete Hours

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  • Bloemen, Hans

    ()
    (VU University Amsterdam)

Abstract

Most empirical studies on the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours choice framework with fixed costs of work. We identify the sharing rule parameters with data on working hours of both the husband and the wife within a couple. Parameter estimates are used to evaluate various model outcomes, like the wage elasticities of labour supply and the impacts of wage changes on the income sharing between husband and wife. We also simulate the consequences of a policy change in the tax system. We find that the collective model has different empirical outcomes of income sharing than a restricted model that imposes pooling of men's earnings and the household's non-labour income in the female's budget constraint. These differences in outcomes have consequences for the evaluation of a policy change in the tax system.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4697.

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Length: 60 pages
Date of creation: Jan 2010
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Handle: RePEc:iza:izadps:dp4697

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Keywords: labour supply; household behaviour; collective model; taxation;

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References

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  1. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  2. Arthur van Soest & Isolde Woittiez & Arie Kapteyn, 1990. "Labor Supply, Income Taxes, and Hours Restrictions in the Netherlands," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 517-558.
  3. Bloemen, H.G. & Kapteyn, A., 1993. "The Estimation of Utility Consistent Labor Supply Models by Means of Simulated Scores," Papers 9367, Tilburg - Center for Economic Research.
  4. Fortin, Bernard & Lacroix, Guy, 1997. "A Test of the Unitary and Collective Models of Household Labour Supply," Economic Journal, Royal Economic Society, vol. 107(443), pages 933-55, July.
  5. Blundell, Richard William & Chiappori, Pierre-André & Magnac, Thierry & Meghir, Costas, 2005. "Collective Labour Supply: Heterogeneity and Non-Participation," CEPR Discussion Papers 5287, C.E.P.R. Discussion Papers.
  6. Hans G. Bloemen, 2008. "Job Search, Hours Restrictions, and Desired Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 26, pages 137-179.
  7. 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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  10. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
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  14. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
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  16. Bargain, Olivier & Moreau, Nicolas, 2003. "Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise," Cahiers de recherche 0308, CIRPEE.
  17. Laisney, François & Beninger, Denis, 2002. "Comparison between unitary and collective models of household labor supply with taxation," ZEW Discussion Papers 02-65, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  22. Frederic Vermeulen & Olivier Bargain & Miriam Beblo & Denis Beninger & Richard Blundell & Raquel Carrasco & Maria-Concetta Chiuri & François Laisney & Valérie Lechene & Nicolas Moreau & Michal Myck , 2006. "Collective Models of Labor Supply with Nonconvex Budget Sets and Nonparticipation: A Calibration Approach," Review of Economics of the Household, Springer, vol. 4(2), pages 113-127, 06.
  23. Soest, A.H.O. van & Das, J.W.M., 2000. "Family Labor Supply and Proposed Tax Reforms in the Netherlands," Discussion Paper 2000-20, Tilburg University, Center for Economic Research.
  24. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "Evaluating In-Work Benefit Reform: The Working Families Tax Credit in the U.K," JCPR Working Papers 160, Northwestern University/University of Chicago Joint Center for Poverty Research.
  25. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
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  27. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
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Citations

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Cited by:
  1. André De Palma & Nathalie Picard & Ignacio Inoa, 2013. "Discrete Choice Decision-Making with Multiple Decision Makers within the Household," Working Papers hal-00812835, HAL.
  2. Tibor Hanappi & Sandra Müllbacher, 2012. "Tax Incentives and Family Labor Supply in Austria," NRN working papers 2012-12, The Austrian Center for Labor Economics and the Analysis of the Welfare State, Johannes Kepler University Linz, Austria.
  3. Nicole Bosch & Miriam Gielen & Egbert Jongen & Mauro Mastrogiacomo (DNB & CPB), 2013. "A structural analysis of labour supply elasticities in the Netherlands," CPB Discussion Paper 235, CPB Netherlands Bureau for Economic Policy Analysis.

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