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Income Taxation in an Empirical Collective Household Labour Supply Model with Discrete Hours

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  • Bloemen, Hans

    () (Vrije Universiteit Amsterdam)

Abstract

Most empirical studies on the impact of labour income taxation on the labour supply behaviour of households use a unitary modelling approach. In this paper we empirically analyze income taxation and the choice of working hours by combining the collective approach for household behaviour and the discrete hours choice framework with fixed costs of work. We identify the sharing rule parameters with data on working hours of both the husband and the wife within a couple. Parameter estimates are used to evaluate various model outcomes, like the wage elasticities of labour supply and the impacts of wage changes on the income sharing between husband and wife. We also simulate the consequences of a policy change in the tax system. We find that the collective model has different empirical outcomes of income sharing than a restricted model that imposes pooling of men's earnings and the household's non-labour income in the female's budget constraint. These differences in outcomes have consequences for the evaluation of a policy change in the tax system.

Suggested Citation

  • Bloemen, Hans, 2010. "Income Taxation in an Empirical Collective Household Labour Supply Model with Discrete Hours," IZA Discussion Papers 4697, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4697
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    References listed on IDEAS

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    Cited by:

    1. Olivier Bargain & Andreas Peichl, 2016. "Own-wage labor supply elasticities: variation across time and estimation methods," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-31, December.
    2. Nicole Bosch & Miriam Gielen & Egbert Jongen & Mauro Mastrogiacomo (DNB & voorheen CPB), 2013. "A structural analysis of labour supply elasticities in the Netherlands," CPB Discussion Paper 235, CPB Netherlands Bureau for Economic Policy Analysis.
    3. André de Palma & Nathalie Picard & Ignacio Inoa, 2014. "Discrete choice decision-making with multiple decision-makers within the household," Chapters,in: Handbook of Choice Modelling, chapter 16, pages 363-382 Edward Elgar Publishing.
    4. Tibor Paul Hanappi & Sandra Müllbacher, 2016. "Tax incentives and family labor supply in Austria," Review of Economics of the Household, Springer, vol. 14(4), pages 961-987, December.
    5. Sandra Dandie & Joseph Mercante, 2007. "Australian labour supply elasticities: Comparison and critical review," Treasury Working Papers 2007-04, The Treasury, Australian Government, revised Oct 2007.
    6. Bargain, Olivier & Peichl, Andreas, 2013. "Steady-state labor supply elasticities: A survey," ZEW Discussion Papers 13-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.

    More about this item

    Keywords

    labour supply; household behaviour; collective model; taxation;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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