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Beyond Ramsey: Gender-Based Taxation with Non-Cooperative Couples

  • Volker Meier

    ()

  • Helmut Rainer

    ()

This paper explores the implications of gender-based income taxation in a non- cooperative model of a couple’s time allocation between market work and providing a household public good. We find that the optimal structure of differential taxation by gender is solely determined by spouses’ relative marginal rates of substitution between the public household good and private consumption. Breaking down this general rule into the primitives of the model, the spouse with a lower personal valuation of the public household good should be taxed at a higher rate. If these valuations are identical, a comparative advantage in home production relative to market work will imply a higher marginal tax rate. Using a realistic calibration, we show that these two results may combine to imply a higher optimal tax rate on female labor supply. This result stands in sharp contrast to previous models of gender-based taxation in which households select Pareto efficient allocations. Extending the model to include altruistic preferences, leisure, or human capital accumulation reduces optimal tax rates, while sequential labor supply decisions affect the optimal tax rate of the primary earner in an ambiguous direction.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3966.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3966
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  1. Michael J. Boskin & Eytan Sheshinski, 1979. "Optimal Tax Treatment of the Family: Married Couples," NBER Working Papers 0368, National Bureau of Economic Research, Inc.
  2. Dan Anderberg, 2007. "Inefficient households and the mix of government spending," Public Choice, Springer, vol. 131(1), pages 127-140, April.
  3. Meier, Volker & Rainer, Helmut, 2012. "On the optimality of joint taxation for noncooperative couples," Munich Reprints in Economics 19177, University of Munich, Department of Economics.
  4. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
  5. 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.
  6. Weichselbaumer, Doris & Winter-Ebmer, Rudolf, 2003. "A Meta-Analysis of the International Gender Wage Gap," Economics Series 143, Institute for Advanced Studies.
  7. Henrik Jacobsen Kleven & Claus Thustrup Kreiner, 2007. "Optimal Taxation of Married Couples with Household Production," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 63(4), pages 498-518, December.
  8. Zhiyang Jia, 2005. "Labor Supply of Retiring Couples and Heterogeneity in Household Decision-Making Structure," Review of Economics of the Household, Springer, vol. 3(2), pages 215-233, 06.
  9. Elisabeth Gugl, 2009. "Income splitting, specialization, and intra-family distribution," Canadian Journal of Economics, Canadian Economics Association, vol. 42(3), pages 1050-1071, August.
  10. Daniela Del Boca & Christopher Flinn, 2009. "Endogeneous Household Interaction," Carlo Alberto Notebooks 109, Collegio Carlo Alberto.
  11. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, vol. 156(1), pages 25-43, March.
  12. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "The Optimal Income Taxation of Couples," Econometrica, Econometric Society, vol. 77(2), pages 537-560, 03.
  13. Patricia Apps & Ray Rees, 2004. "Fertility, Taxation and Family Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 745-763, December.
  14. 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.
  15. Lundberg, Shelly & Pollak, Robert A, 1993. "Separate Spheres Bargaining and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 988-1010, December.
  16. 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.
  17. Cochard François, Couprie Helene, Hopfensitz Astrid, 2009. "Do Spouses Cooperate? And If Not: Why?," THEMA Working Papers 2009-10, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  18. 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.
  19. Meier, Volker & Wrede, Matthias, 2013. "Reducing the excess burden of subsidizing the stork: Joint taxation, individual taxation, and family tax splitting," Munich Reprints in Economics 19213, University of Munich, Department of Economics.
  20. 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.
  21. John Piggott & John Whalley, 1994. "The Tax Unit and Household Production," NBER Working Papers 4820, National Bureau of Economic Research, Inc.
  22. Craig Brett, 2007. "Optimal nonlinear taxes for families," International Tax and Public Finance, Springer, vol. 14(3), pages 225-261, June.
  23. 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.
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