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On the Optimality of Joint Taxation for Non-Cooperative Couples

  • Volker Meier


  • Helmut Rainer


We present a non-cooperative model of a family’s time allocation between work and a home-produced public good, and examine whether the income tax should apply to couples or individuals. While tax-induced labor supply distortions lead to overprovision of the public good, spouses’ failure to internalize the collective effect of their choices points towards underprovision. A large parameter range exists for which a move from individual to joint taxation improves the welfare of both spouses. The source of Pareto-improvement consists in moving the level of the public good closer to its first-best, while an adjustment of intra-family transfers compensates the secondary earner for the increased tax load.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3128.

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Date of creation: 2010
Date of revision:
Handle: RePEc:ces:ceswps:_3128
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  1. Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2006. "The Optimal Income Taxation of Couples," CEPR Discussion Papers 5978, C.E.P.R. Discussion Papers.
  2. Patricia Apps & Ray Rees, 2007. "The Taxation of Couples," CEPR Discussion Papers 559, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Helmut Rainer, 2005. "Should We Write Prenuptial Contracts?," Discussion Paper Series, Department of Economics 200514, Department of Economics, University of St. Andrews.
  4. Konrad, Kai A & Lommerud, Kjell Erik, 1995. " Family Policy with Non-cooperative Families," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 581-601, December.
  5. Alesina, Alberto F & Ichino, Andrea & Karabarbounis, Loukas, 2007. "Gender Based Taxation and the Division of Family Chores," CEPR Discussion Papers 6591, C.E.P.R. Discussion Papers.
  6. Patricia F. Apps & Ray Rees, 1999. "Individual versus Joint Taxation in Models with Household Production," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 393-403, April.
  7. Volker Meier & Matthias Wrede, 2008. "Reducing the Excess Burden of Subsidizing the Stork: Joint Taxation, Individual Taxation, and Family Tax Splitting," CESifo Working Paper Series 2470, CESifo Group Munich.
  8. Piggott, John & Whalley, John, 1996. "The Tax Unit and Household Production," Journal of Political Economy, University of Chicago Press, vol. 104(2), pages 398-418, April.
  9. Peter Gottfried & Wolfram Richter, 1999. "The Tax Unit and Household Production: Comment," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 404-409, April.
  10. Jonathan P Thomas & Tim Worrall, 2010. "Dynamic Relational Contracts with Credit Constraints," The School of Economics Discussion Paper Series 1009, Economics, The University of Manchester.
  11. Dan Anderberg, 2007. "Inefficient households and the mix of government spending," Public Choice, Springer, vol. 131(1), pages 127-140, April.
  12. Apps, Patricia & Rees, Ray, 1999. "On the taxation of trade within and between households," Journal of Public Economics, Elsevier, vol. 73(2), pages 241-263, August.
  13. Apps, Patricia & Rees, Ray, 2009. "Relational Contracts, Taxation and the Household," IZA Discussion Papers 4189, Institute for the Study of Labor (IZA).
  14. Zhiqi Chen & Frances Woolley, 1999. "A Cournot-Nash Model of Family Decision Making," Carleton Economic Papers 99-13, Carleton University, Department of Economics, revised Oct 2001.
  15. Michael J. Boskin & Eytan Sheshinski, 1979. "Optimal Tax Treatment of the Family: Married Couples," NBER Working Papers 0368, National Bureau of Economic Research, Inc.
  16. Lundberg, S. & Pollak, R.A., 1991. "Separate Spheres Bargaining and the Marriage Market," Discussion Papers in Economics at the University of Washington 91-08, Department of Economics at the University of Washington.
  17. Vicky Barham & Rose Anne Devlin, 2004. "A Theory of Rational Marriage and Divorce," Working Papers 0405E, University of Ottawa, Department of Economics.
  18. repec:cup:cbooks:9780521716284 is not listed on IDEAS
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  20. Pollak, Robert A, 1985. "A Transaction Cost Approach to Families and Households," Journal of Economic Literature, American Economic Association, vol. 23(2), pages 581-608, June.
  21. Imran Rasul, 2006. "The Economics of Child Custody," Economica, London School of Economics and Political Science, vol. 73(289), pages 1-25, 02.
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