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Optimal Taxation, Child Care and Models of the Household

  • Patricia Apps
  • Ray Rees

This paper presents the properties of optimal piecewise linear tax systems for two-earner households, based on joint and individual incomes respectively. A key contribution is the analysis of the interaction between second earner wage differences, variation in the price of child care and domestic productivity differences as determinants of across-household heterogeneity in second earner labour supply, and of the resulting relationship between household income and the wellbeing of household members. A central result is that taking account of a richer and more realistic specification of household time use widens the set of cases in which individual taxation is welfare-superior.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4578.

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Date of creation: 2014
Date of revision:
Handle: RePEc:ces:ceswps:_4578
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  1. Alesina, Alberto & Ichino, Andrea & Karabarbounis, Loukas, 2007. "Gender Based Taxation and the Division of Family Chores," IZA Discussion Papers 3233, Institute for the Study of Labor (IZA).
  2. Dahlby, Bev, 1998. "Progressive taxation and the social marginal cost of public funds," Journal of Public Economics, Elsevier, vol. 67(1), pages 105-122, January.
  3. Petter Lundborg; & Anton Nilsson; & Dan-Olof Rooth, 2012. "Parental education and offspring outcomes: evidence from the Swedish compulsory schooling reform," Health, Econometrics and Data Group (HEDG) Working Papers 12/12, HEDG, c/o Department of Economics, University of York.
  4. repec:cup:cbooks:9780521716284 is not listed on IDEAS
  5. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2011. "Optimal tax and transfer programs for couples with extensive labor supply responses," Journal of Public Economics, Elsevier, vol. 95(11), pages 1485-1500.
  6. Patricia Apps & Ngo Van Long & Ray Rees, 2009. "Optimal Piecewise Linear Income Taxation," CESifo Working Paper Series 2565, CESifo Group Munich.
  7. Craig Brett, 2007. "Optimal nonlinear taxes for families," International Tax and Public Finance, Springer, vol. 14(3), pages 225-261, June.
  8. Martin Feldstein & Daniel Feenberg, 1995. "The Taxation of Two Earner Families," NBER Working Papers 5155, National Bureau of Economic Research, Inc.
  9. Boskin, Michael J. & Sheshinski, Eytan, 1983. "Optimal tax treatment of the family: Married couples," Journal of Public Economics, Elsevier, vol. 20(3), pages 281-297, April.
  10. Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2006. "The Optimal Income Taxation of Couples," CEPR Discussion Papers 5978, C.E.P.R. Discussion Papers.
  11. Sandmo, Agnar, 1990. "Tax Distortions and Household Production," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 78-90, January.
  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. Sadka, Efraim, 1976. "On Income Distribution, Incentive Effects and Optimal Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 43(2), pages 261-67, June.
  14. Schroyen, Fred, 2003. "Redistributive taxation and the household: the case of individual filings," Journal of Public Economics, Elsevier, vol. 87(11), pages 2527-2547, October.
  15. Almond, Douglas & Currie, Janet, 2011. "Human Capital Development before Age Five," Handbook of Labor Economics, Elsevier.
  16. CREMER, Helmuth & LOZACHMEUR, Jean-Marie & PESTIEAU, Pierre, . "Income taxation of couples and the tax unit choice," CORE Discussion Papers RP 2372, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  17. Raj Chetty, 2008. "Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods," NBER Working Papers 14399, National Bureau of Economic Research, Inc.
  18. Sheshinski, Eytan, 1972. "The Optimal Linear Income-Tax," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 297-302, July.
  19. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  20. Sheshinski, Eytan, 1989. "Note on the shape of the optimum income tax schedule," Journal of Public Economics, Elsevier, vol. 40(2), pages 201-215, November.
  21. Joel Slemrod & Shlomo Yitzhaki & Joram Mayshar, 1991. "The Optimal Two-Bracket Linear Income Tax," NBER Working Papers 3847, National Bureau of Economic Research, Inc.
  22. repec:cup:cbooks:9780521887878 is not listed on IDEAS
  23. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
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