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Comparison between unitary and collective models of household labor supply with taxation

  • Laisney, François
  • Beninger, Denis

Several recent papers have shown the relevance of collective models for the empirical investigation of household labor supply and consumption. Yet the estimation of collective models in the presence of non-linear budget sets and participation decisions remains a daunting task. This paper compares collective and unitary models on the basis of simulated collective data with income taxation. We distinguish the cases of individual and joint taxation. Estimating the unitary model we obtain strikingly different ?preference? parameters depending on the type of taxation. We also obtain substantial differences between predicted adjustments to labor supply following a switch between tax regimes, and hence potentially wide-ranging definitions of revenue-neutral versions of tax reforms. Finally we discuss distortions affecting the welfare analysis of reforms on the basis of unitary estimates when the model generating the data is a collective model. The results suggest that increased efforts should be devoted to the estimation of collective models with taxation.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 02-65.

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Date of creation: 2002
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Handle: RePEc:zbw:zewdip:539
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  1. Martin Browning & Pierre-Andre Chiappori, 1994. "Efficient Intra-Household Allocations: a General Characterization and Empirical Tests," Department of Economics Working Papers 1994-02, McMaster University.
  2. Chiappori, P.A., 1994. "Introducing Household Production in Collective Models of Labour Suply," DELTA Working Papers 94-18, DELTA (Ecole normale supérieure).
  3. Chiappori, P.A., 1989. "Collective Labour Supply and Welfare," DELTA Working Papers 89-07, DELTA (Ecole normale supérieure).
  4. Vermeulen, Frederic, 2002. " Collective Household Models: Principles and Main Results," Journal of Economic Surveys, Wiley Blackwell, vol. 16(4), pages 533-64, September.
  5. Lundberg, S.J. & Pollak, R.A. & Wales, T.J., 1994. "Do Husbands and Wives Pool Their Resources? Evidence from U.K. Child Benefit," Working Papers 94-6, University of Washington, Department of Economics.
  6. Apps, P.F. & Rees, R., 1993. "Labour Supply, Household Production and Intra-Family Welfare Distribution," Working Papers 1993-3, University of Guelph, Department of Economics and Finance.
  7. Bourguignon, F., 1999. "The Cost of Children: May the Collective Approach to Household Behavior Help?," DELTA Working Papers 1999-01, DELTA (Ecole normale supérieure).
  8. Haddad, Lawrence & Kanbur, Ravi, 1989. "How serious is the neglect of intrahousehold inequality ?," Policy Research Working Paper Series 296, The World Bank.
  9. 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.
  10. Rees, Ray, 1988. "Taxation and the Household," Munich Reprints in Economics 3411, University of Munich, Department of Economics.
  11. Xiaodong Gong & Arthur van Soest, 2002. "Family Structure and Female Labor Supply in Mexico City," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 163-191.
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  13. Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
  14. Chesher, Andrew & Santos Silva, J M C, 2002. "Taste Variation in Discrete Choice Models," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 147-68, January.
  15. Wolf, Elke, 1998. "Do hours restrictions matter? A discrete family labor supply model with endogenous wages and hours restrictions," ZEW Discussion Papers 98-44, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  16. 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.
  17. Ben-Porath, Yoram, 1982. "Economics and the Family-Match or Mismatch? A Review of Becker's A Treatise on the Family," Journal of Economic Literature, American Economic Association, vol. 20(1), pages 52-64, March.
  18. McDonald, James B, 1984. "Some Generalized Functions for the Size Distribution of Income," Econometrica, Econometric Society, vol. 52(3), pages 647-63, May.
  19. Bergstrom, Theodore C, 1989. "A Fresh Look at the Rotten Kid Theorem--and Other Household Mysteries," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1138-59, October.
  20. Apps, Patricia F & Rees, Ray, 1997. "Collective Labor Supply and Household Production," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 178-90, February.
  21. Brett, Craig, 1998. "Tax reform and collective family decision-making," Journal of Public Economics, Elsevier, vol. 70(3), pages 425-440, December.
  22. Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December.
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  24. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  25. Maria Concetta Chiuri, 1999. "Intra-Household Allocation of Time and Resources: Empirical Evidence on a Sample of Italian Households with Young Children," CSEF Working Papers 15, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  26. Apps, Patricia F. & Rees, Ray, 1988. "Taxation and the household," Journal of Public Economics, Elsevier, vol. 35(3), pages 355-369, April.
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