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Title:Is the Household Demand for In-Home Services Sensitive to Tax Reductions? : The French Case PDF Logo
Authors:Flipo, Anne
Fougère, Denis
Olier, Lucile
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1392
Abstract:Our paper examines the impact of tax reductions on the demand for services in the home. For that purpose, we estimate a structural model of demand for such services by using household individual data collected by INSEE (Paris) in 1996. In this model, the net hourly wage paid to the domestic employee, the household preferences for consumption of in-home services and the decision to take advantage of the tax reduction are considered as endogenous variables. Estimation of the econometric model uses the fact that some households are observed to consume domestic services and to take advantage of the tax reduction, while others either consume such services but do not take advantage of the tax reduction, or do not consume these services at all. Its identification relies on an exclusion restriction resulting from the tax credit schedule. Results show that the probability of consuming in-home services increases with age and income. A ten per cent increase in the tax reduction would increase from 45.9 to 50.8 per cent the proportion of households benefiting from the tax reduction among those who consume paid in-home services. Moreover, 13.5 per cent of households who do not actually consume such services would do so after the ten per cent increase in the tax reduction. These simulated variations would mainly concern high-income households.
Subjects:services in the home
tax reduction
household demand
labor cost
JEL:J12
D13
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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