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On the Optimal Fiscal Treatment of Family Size

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  • Alessandro Balestrino

Abstract

Should a benevolent social planner subsidize family size? Typically, contributions assuming exogenous fertility yield an affirmative answer, while those assuming endogenous fertility do not reach definite conclusions. We re-examine the endogenous fertility model, and find that when redistribution is accomplished mostly using non-income taxes, there is indeed a case for encouraging fertility, as long as poor families tend to have more children. Instead, when redistribution is mainly pursued using a non-linear income tax, the above rationale for child subsidization disappears. We finally argue that whether children are a tax asset or a tax liability depends, however, on all the policy instruments, and not only on the tax treatment of family size.

Suggested Citation

  • Alessandro Balestrino, 2001. "On the Optimal Fiscal Treatment of Family Size," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 58(2), pages 140-140, February.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200202)58:2_140:otofto_2.0.tx_2-8
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    References listed on IDEAS

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    1. Balcer, Yves & Sadka, Efraim, 1986. "Equivalence scales, horizontal equity and optimal taxation under utilitarianism," Journal of Public Economics, Elsevier, vol. 29(1), pages 79-97, February.
    2. Cigno, Alessandro & Pettini, Anna, 2002. "Taxing family size and subsidizing child-specific commodities?," Journal of Public Economics, Elsevier, vol. 84(1), pages 75-90, April.
    3. Cigno, Alessandro, 1983. "Corrigendum [On Optimal Family Allowances]," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 329-329, July.
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    5. Willis, Robert J, 1973. "A New Approach to the Economic Theory of Fertility Behavior," Journal of Political Economy, University of Chicago Press, vol. 81(2), pages 14-64, Part II, .
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    7. Dasgupta, Partha, 2000. "Reproductive externalities and fertility behaviour," European Economic Review, Elsevier, vol. 44(4-6), pages 619-644, May.
    8. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January.
    9. Batina, Raymond G., 1987. "The consumption tax in the presence of altruistic cash and human capital bequests with endogenous fertility decisions," Journal of Public Economics, Elsevier, vol. 34(3), pages 329-354, December.
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    11. Nava, Mario & Schroyen, Fred & Marchand, Maurice, 1996. "Optimal fiscal and public expenditure policy in a two-class economy," Journal of Public Economics, Elsevier, vol. 61(1), pages 119-137, July.
    12. Henrik Jacobsen Kleven, "undated". "Optimum Taxation and the Allocation of Time," EPRU Working Paper Series 00-16, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
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    Cited by:

    1. Volker Meier & Matthias Wrede, 2013. "Reducing the excess burden of subsidizing the stork: joint taxation, individual taxation, and family tax splitting," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(3), pages 1195-1207, July.

    More about this item

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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