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Non-minimization of source taxes on labor income: empirical evidence from Germany

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  • Sven Stöwhase

Abstract

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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  • Sven Stöwhase, 2011. "Non-minimization of source taxes on labor income: empirical evidence from Germany," Review of Economics of the Household, Springer, vol. 9(2), pages 293-306, June.
    • Handle: RePEc:kap:reveho:v:9:y:2011:i:2:p:293-306
    DOI: 10.1007/s11150-009-9077-2
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    Cited by:

    1. Olivier Bargain & Damien Echevin & Audrey Etienne & Nicolas Moreau & Adrien Pacifico, 2022. "Tax Minimization by French Cohabiting Couples," Post-Print hal-04440515, HAL.
    2. Johannes Koeckeis, 2022. "Intra-Household Inequality and Tax Planning of Same-Sex Couples," GRAPE Working Papers 73, GRAPE Group for Research in Applied Economics.
    3. Olivier Bargain & Damien Echevin & Nicolas Moreau & Adrien Pacifico, 2019. "Inefficient Couples: Non-minimization of the Tax Burden among French Cohabiting Couples," TEPP Working Paper 2019-05, TEPP.
    4. Olivier Bargain & Damien Echevin & Nicolas Moreau & Adrien Pacifico, 2019. "Inefficient Couples: Non-minimization of the Tax Burden among French Cohabiting Couples," Working Papers hal-02365239, HAL.
    5. Mizuki Komura, 2013. "Tax reform and endogenous gender bargaining power," Review of Economics of the Household, Springer, vol. 11(2), pages 175-192, June.
    6. Schröder, Melanie & Schmitt, Norma & Heynemann, Britta & Brünn, Claudia, 2013. "Income Taxation and Labor Supply: An Experiment on Couple's Work Effort," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79735, Verein für Socialpolitik / German Economic Association.
    7. Melanie Schröder & Norma Burow, 2016. "Couple's Labor Supply, Taxes, and the Division of Housework in a Gender-Neutral Lab," Discussion Papers of DIW Berlin 1593, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    Withholding taxes; Empirics; Microsimulation; Germany; D10; D31; H24; H31;
    All these keywords.

    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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