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Wives, husbands and wheelchairs: Optimal tax policy under gender-specific health

  • Marie-Louise Leroux

    (CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain)

  • Grégory Ponthière

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

We study the optimal taxation problem in an economy composed of two-person households (men and women), where agents influence their own old-age dependency prospects through health spending. It is shown that the utilitarian social optimum can be decentralized by means of lump sum transfers from men to women, because women exhibit a higher disability-free life expectancy than men for a given level of health spending. Once self-oriented concerns for coexistence are introduced, the decentralization of the first-best requires also gender-specific subsidies on health spending aimed at internalizing the effect of each agent's health on the spouse's welfare. In the presence of singles in the population, the optimal policy requires also a differentiated subsidization of health spending for singles and couples. Finally, under imperfect observability of couples, the incentive compatibility constraints reinforce the need for subsidization of health spendings.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00575059.

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Date of creation: Nov 2009
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Handle: RePEc:hal:psewpa:halshs-00575059
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  21. LEROUX, Marie-Louise & PONTHIERE, Grégory, 2008. "Optimal tax policy and expected longevity: a mean and variance approach," CORE Discussion Papers 2008039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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