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Title:Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? : A Simulation Exercise PDF Logo
Authors:Bargain, Olivier
Moreau, Nicolas
Issue Date:2005
Series/Report no.:IZA Discussion paper series 1451
Abstract:The literature on household behavior contains hardly any empirical research on the withinhousehold distributional effect of tax-benefit policies. We simulate this effect in the framework of a collective model of labor supply when shifting from a joint to an individual taxation system in France. We show that the net-of-tax relative earning potential of the wife is a significant determinant of intrahousehold negotiation but with very low elasticity. Consequently, the labor supply responses to the reform are entirely driven by the traditional substitution and income effects as in a unitary model. For some households only, the reform alters the intrahousehold distribution in a way that tends to change normative conclusions. A sensitivity analysis shows that the collective model would be required if the tax reform was both radical and of extended scope.
Subjects:collective model
intrahousehold allocation
household labor supply
tax reform
JEL:H31
D12
J22
D11
C71
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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