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

Author

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  • Flipo, Anne
  • Fougère, Denis
  • 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

  • Flipo, Anne & Fougère, Denis & 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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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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 for the Study of Labor (IZA).
    3. van Soest, A.H.O. & Stancanelli, E.G.F., 2010. "Does Income Taxation Affect Partners’ Household Chores?," Discussion Paper 2010-76, Tilburg University, Center for Economic Research.
    4. Fakih, Ali & Marrouch, Walid, 2012. "Determinants of Domestic Workers' Employment: Evidence from Lebanese Household Survey Data," IZA Discussion Papers 6822, Institute for the Study of Labor (IZA).
    5. Leslie S. Stratton, 2015. "The determinants of housework time," IZA World of Labor, Institute for the Study of Labor (IZA), pages 133-133, March.
    6. 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.

    More about this item

    Keywords

    Household Demand; In-Home Services; Labour Cost; Tax Reduction;

    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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