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Beyond Ramsey: Gender-Based Taxation with Non-Cooperative Couples

  • Meier, Volker
  • Rainer, Helmut

This paper explores the implications of gender-based income taxation in a non-cooperative model of a couple's time allocation between market work and providing a household public good. We find that the optimal structure of differential taxation by gender is solely determined by spouses' relative marginal rates of substitution between the public household good and private consumption. Breaking down this general rule into the primitives of the model, the spouse with a lower personal valuation of the public household good should be taxed at a higher rate. If these valuations are identical, a comparative advantage in home production relative to market work will imply a higher marginal tax rate. Using a realistic calibration, we show that these two results may combine to imply a higher optimal tax rate on female labor supply. This result stands in sharp contrast to previous models of gender-based taxation in which households select Pareto efficient allocations. Extending the model to include altruistic preferences, leisure, or human capital accumulation reduces optimal tax rates, while sequential labor supply decisions affect the optimal tax rate of the primary earner in an ambiguous direction.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79877.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79877
Contact details of provider: Web page: http://www.socialpolitik.org/
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  2. Volker Meier & Helmut Rainer, 2010. "On the Optimality of Joint Taxation for Non-Cooperative Couples," CESifo Working Paper Series 3128, CESifo Group Munich.
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  7. Zhiyang Jia, 2005. "Labor Supply of Retiring Couples and Heterogeneity in Household Decision-Making Structure," Discussion Papers 404, Statistics Norway, Research Department.
  8. Volker Meier & Matthias Wrede, 2013. "Reducing the excess burden of subsidizing the stork: joint taxation, individual taxation, and family tax splitting," Journal of Population Economics, Springer, vol. 26(3), pages 1195-1207, July.
  9. Konrad, Kai A & Lommerud, Kjell Erik, 1995. " Family Policy with Non-cooperative Families," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 581-601, December.
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  13. Weichselbaumer, Doris & Winter-Ebmer, Rudolf, 2003. "A Meta-Analysis of the International Gender Wage Gap," IZA Discussion Papers 906, Institute for the Study of Labor (IZA).
  14. Zhiqi Chen & Frances Woolley, 1999. "A Cournot-Nash Model of Family Decision Making," Carleton Economic Papers 99-13, Carleton University, Department of Economics, revised Oct 2001.
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  17. Patricia F. Apps & Ray Rees, 1999. "Individual versus Joint Taxation in Models with Household Production," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 393-403, April.
  18. Cochard, François & Couprie, Hélène & Hopfensitz, Astrid, 2009. "Do Spouses Cooperate? And If Not: Why?," TSE Working Papers 09-134, Toulouse School of Economics (TSE).
  19. Apps, P.F. & Rees, R., 1998. "On the Taxation of Trade Within and Between Households," Papers 337, Australian National University - Department of Economics.
  20. Chen, Zhiqi & Woolley, Frances, 2001. "A Cournot-Nash Model of Family Decision Making," Economic Journal, Royal Economic Society, vol. 111(474), pages 722-48, October.
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  24. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, vol. 156(1), pages 25-43, March.
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