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Revisiting the Equity-Efficiency Trade-off: Taxation with Non-Cooperative Families

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  • Alessandro Balestrino

Abstract

We consider an economy with intrahousehold inequality where household public goods like child care or care of the elderly are produced at home using time. Noncooperative behavior determines an inefficiently low provision of such goods, and the presence of contribution productivity differentials implies comparative advantages in home work versus market work. The joint consideration of optimal tax rules and tax reform rules establishes a presumption in favor of high progressivity achieved with a limited number of income brackets, possibly a flat-rate system. High progressivity is instrumental in remedying the inefficiency associated with the lack of cooperation, while limiting the differentiation of tax rates turns out to favor the full exploitation of comparative advantages.

Suggested Citation

  • Alessandro Balestrino, 2004. "Revisiting the Equity-Efficiency Trade-off: Taxation with Non-Cooperative Families," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(4), pages 515-515, December.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200412)60:4_515:rtettw_2.0.tx_2-j
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    Cited by:

    1. Olivier Bargain & Olivier Donni, 2014. "Optimal Commodity Taxation and Redistribution within Households," Economica, London School of Economics and Political Science, pages 48-62.
    2. Haizhen Mou & Stanley L. Winer, 2012. "Fiscal Incidence when both Individual Welfare and Family Structure Matter: The Case of Subsidization of Home-Care for the Elderly," CESifo Working Paper Series 3731, CESifo Group Munich.

    More about this item

    Keywords

    noncooperative behaviour; public household goods; optimal taxation; income tax; tax reform;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • D1 - Microeconomics - - Household Behavior

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