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Gender-Specific subsidies and female empowerment in optimal taxation

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  • Alves, Cassiano Breno Machado
  • Costa, Carlos Eugênio da
  • Lobel, Felipe
  • Alves, Katia Aiko Nishiyama

Abstract

Starting with an optimal income-splitting household tax schedule we assess the impact of gender-specific subsidies. Motivated by evidence that spouses’ relative earnings influence their power, we let bargaining weights respond to this subsidy, and household labor supply choices vary in turn with weights. Quantitative exploration reveals that a subsidy on women’s earnings is welfare-improving, but that neglecting the empowering effect of subsidies greatly underestimates those gains.In our baseline assessment, 99.6% of all women benefit from the policy. For 78% of women, welfare gains are no smaller than 5%, and for 15%, gains exceed 10%. The optimal subsidy for women is about 16% while the benchmark of models where the power channel is neglected is close to 0% with trivial average gains. We find that it is women in the most productive households who benefit the most from this policy.

Suggested Citation

  • Alves, Cassiano Breno Machado & Costa, Carlos Eugênio da & Lobel, Felipe & Alves, Katia Aiko Nishiyama, 2025. "Gender-Specific subsidies and female empowerment in optimal taxation," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 848, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:848
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