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Is the Household Demand for In-Home Services Sensitive to Tax Reductions? The French Case

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  • Fougère, Denis
  • Flipo, Anne
  • Olier, Lucile

Abstract

Our paper is concerned with the impact of tax reductions on the demand for services in the home. For that purpose, we consider the particular case of the French legislation voted in 1991. This law allows households employing paid help in the home to deduct from their income tax 50% of the sums paid out, subject to an annual ceiling. Did the reduction in overall cost of jobs in the form of services to individuals stimulate the household demand for these services? To analyse this problem, we estimate a structural model of demand for in-home services by using household individual data collected by INSEE (Paris) in 1996. Our estimations show that the relative marginal effect of a price variation on the probability of a strictly positive demand for in-home services is negative; its absolute value decreases with the educational level and with the income level of the household. It is generally higher for households without children less than 6 years old. These results suggest that a differentiated tax reduction, varying with the household income level and with the presence of young children in the household, should have a higher effect on the demand for in-home services than a uniform tax credit, such as the one granted in France since 1991.

Suggested Citation

  • Fougère, Denis & Flipo, Anne & Olier, Lucile, 2000. "Is the Household Demand for In-Home Services Sensitive to Tax Reductions? The French Case," CEPR Discussion Papers 2577, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2577
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    Cited by:

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    2. Ali Fakih & Pascal L. Ghazalian, 2013. "Female Labour Force Participation in MENA's Manufacturing Sector: The Implications of Firm-related and National Factors," CIRANO Working Papers 2013s-46, CIRANO.
    3. François-Xavier Devetter, 2016. "Can Public Policies Bring about the Democratization of the Outsourcing of Household Tasks?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 48(3), pages 365-393, September.
    4. Jukka Pirttilä & Hakan Selin, 2011. "Tax Policy and Employment: How Does the Swedish System Fare?," CESifo Working Paper Series 3355, CESifo.
    5. Sam Hak Kan Tang & Linda Chor Wing Yung, 2016. "Maids or mentors? The effects of live-in foreign domestic workers on children's educational achievement in Hong Kong," Education Economics, Taylor & Francis Journals, vol. 24(1), pages 96-120, February.
    6. Stancanelli, Elena G. F. & Stratton, Leslie S., 2010. "Her Time, His Time, or the Maid's Time: An Analysis of the Demand for Domestic Work," IZA Discussion Papers 5253, Institute of Labor Economics (IZA).
    7. van Soest, Arthur & Stancanelli, Elena G. F., 2010. "Does Income Taxation Affect Partners' Household Chores?," IZA Discussion Papers 5038, Institute of Labor Economics (IZA).
    8. Fakih, Ali & Marrouch, Walid, 2012. "Determinants of Domestic Workers' Employment: Evidence from Lebanese Household Survey Data," IZA Discussion Papers 6822, Institute of Labor Economics (IZA).
    9. Ali Fakih & Walid Marrouch, 2014. "Who hires foreign domestic workers? evidence from Lebanon," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(3), pages 339-352, July-Sept.
    10. Rickne, Johanna, 2021. "Who Cleans My House If the Government Pays? Disadvantaged Labor Market Groups in the Tax-Subsidized Domestic Service Sector," IZA Policy Papers 171, Institute of Labor Economics (IZA).
    11. Placide Abasabanye & Franck Bailly & François-Xavier Devetter, 2018. "Does Contact Between Employees and Service Recipients Lead to Socially More Responsible Behaviours? The Case of Cleaning," Journal of Business Ethics, Springer, vol. 153(3), pages 813-824, December.
    12. Izabela Styczynska, 2012. "Determinants of household demand for services - Formal Versus Informal Sector," CASE Network Studies and Analyses 444, CASE-Center for Social and Economic Research.
    13. Rickne Johanna, 2021. "Who cleans my house if the government pays? Refugees, low-educated workers, and long-term unemployed in tax-subsidized domestic service firms," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-37, May.

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    More about this item

    Keywords

    In-home services; Tax reduction; Household demand; Labour cost;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure

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