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Too much of a good thing? Using tax incentives to stimulate dual-earner couples

Author

Listed:
  • Henk-Wim Boer

    (Independent Researcher)

  • Egbert Jongen

    (Leiden University
    CESifo
    IFS
    IZA)

  • Patrick Koot

    (Dutch Ministry of Social Affairs and Employment)

Abstract

Following major tax-benefit reforms over the past decades, the Netherlands is an international front-runner in stimulating dual-earner couples via the tax system. We consider whether or not these tax incentives have perhaps gone too far. Using the inverse optimal tax method, our results indicate that the reforms resulted in social welfare weights that are no longer monotonically declining in household income, which is hard to rationalize with social welfare weights based solely on household income. However, this could be rationalized by other factors like preference heterogeneity between households or “affirmative feminist” social preferences. More challenging is our finding that the social welfare weights have become negative for single-earner couples with children 0–3 years of age, which suggests that the system is no longer Pareto optimal.

Suggested Citation

  • Henk-Wim Boer & Egbert Jongen & Patrick Koot, 2025. "Too much of a good thing? Using tax incentives to stimulate dual-earner couples," Journal of Population Economics, Springer;European Society for Population Economics, vol. 38(4), pages 1-26, December.
    • Handle: RePEc:spr:jopoec:v:38:y:2025:i:4:d:10.1007_s00148-025-01126-y
    DOI: 10.1007/s00148-025-01126-y
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    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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