The present paper offers empirical evidence for pareto-inefficiencies within German households. Using a large dataset from the German income tax statistic and conducting microsimulation analysis it refutes the assumption of pareto-efficiencies underlying the unitary as well as cooperative bargaining models of the household. The analysis is based on the unique features of the German source tax on wage income which give married couples some degree of freedom when determining their total tax liability and its distribution among spouses. We interpret distributive choices that do not minimize total tax withholding as the outcome of ineffiencient intra-family bargaining. Our result supports the findings of previous empirical work for developing countries and call for a reconsideration of the dominant models on intrahousehold-decision-making.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
13131.
Find related papers by JEL classification: D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies D10 - Microeconomics - - Household Behavior - - - General
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