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

  • Bloemen, Hans


    (VU University Amsterdam)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4697.

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Length: 60 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4697
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  1. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  2. Richard Blundell & Pierre-André Chiappori & Thierry Magnac & Costas Meghir, 1998. "Collective labour supply: heterogeneity and non-participation," IFS Working Papers W98/20, Institute for Fiscal Studies.
  3. Bargain, Olivier & Moreau, Nicolas, 2005. "Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise," IZA Discussion Papers 1451, Institute for the Study of Labor (IZA).
  4. Hausman, Jerry & Ruud, Paul, 1984. "Family Labor Supply with Taxes," American Economic Review, American Economic Association, vol. 74(2), pages 242-48, May.
  5. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  6. Pierre-Andre Chiappori & Bernard Fortin & Guy Lacroix, 2002. "Marriage Market, Divorce Legislation, and Household Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 110(1), pages 37-72, February.
  7. Hans G. Bloemen, 2008. "Job Search, Hours Restrictions, and Desired Hours of Work," Journal of Labor Economics, University of Chicago Press, vol. 26, pages 137-179.
  8. Bloemen, H.G. & Kapteyn, A.J., 1993. "The estimation of utility consistent labor supply models by means of simulated scores," Discussion Paper 1993-67, Tilburg University, Center for Economic Research.
  9. Vermeulen, F.M.P. & Bargain, O. & Beblo, M. & Beninger, D. & Blundell, R. & Carrasco, R. & Chiuri, M-C. & Laisney, F. & Lechene, V. & Moreau, N. & Myck, M. & Ruiz-castillo, J., 2006. "Collective models of labor supply with nonconvex budget sets and nonparticipation : A calibration approach," Other publications TiSEM 8dec6b88-3dce-460f-ab9b-2, Tilburg University, School of Economics and Management.
  10. Olivier Donni, 2001. "Collective Household Labor Supply: Nonparticipation and Income Taxation," Cahiers de recherche CREFE / CREFE Working Papers 140, CREFE, Université du Québec à Montréal.
  11. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  12. McElroy, Marjorie B & Horney, Mary Jean, 1981. "Nash-Bargained Household Decisions: Toward a Generalization of the Theory of Demand," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(2), pages 333-49, June.
  13. Bosch, Nicole & van der Klaauw, Bas, 2009. "Analyzing Female Labor Supply: Evidence from a Dutch Tax Reform," IZA Discussion Papers 4238, Institute for the Study of Labor (IZA).
  14. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
  15. van Soest, A.H.O. & Woittiez, I.B. & Kapteyn, A.J., 1989. "Labour supply, income taxes and hours restrictions in the Netherlands," Discussion Paper 1989-3, Tilburg University, Center for Economic Research.
  16. Richard Blundell & Pierre-Andr� Chiappori & Costas Meghir, 2005. "Collective Labor Supply with Children," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1277-1306, December.
  17. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  18. Chiappori, Pierre-Andre, 1997. "Introducing Household Production in Collective Models of Labor Supply," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 191-209, February.
  19. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  20. Laisney, François & Beninger, Denis, 2002. "Comparison between unitary and collective models of household labor supply with taxation," ZEW Discussion Papers 02-65, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  21. Fortin, Bernard & Lacroix, Guy, 1997. "A Test of the Unitary and Collective Models of Household Labour Supply," Economic Journal, Royal Economic Society, vol. 107(443), pages 933-55, July.
  22. Kapteyn, A. & Soest, A.V. & Woittiez, I., 1989. "Labour Supply, Income Taxes And Hours Restrictions In The Netherlands," Papers 8903, Tilburg - Center for Economic Research.
  23. Frederic Vermeulen, 2006. "A collective model for female labour supply with non-participation and taxation," Journal of Population Economics, Springer, vol. 19(1), pages 99-118, February.
  24. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
  25. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  26. Manser, Marilyn & Brown, Murray, 1980. "Marriage and Household Decision-Making: A Bargaining Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 21(1), pages 31-44, February.
  27. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "Evaluating In-Work Benefit Reform: The Working Families Tax Credit in the U.K," JCPR Working Papers 160, Northwestern University/University of Chicago Joint Center for Poverty Research.
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