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Is the household demand for in-home services sensitive to tax reductions? The French case

  • Flipo, Anne
  • Fougere, Denis
  • Olier, Lucile

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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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 91 (2007)
Issue (Month): 1-2 (February)
Pages: 365-385

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Handle: RePEc:eee:pubeco:v:91:y:2007:i:1-2:p:365-385
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
  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. 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.
  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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