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Title:Cooperative Models in Action : Simulation of a Nash-Bargaining Model of Household Labor Supply with Taxation PDF Logo
Authors:Bargain, Olivier
Moreau, Nicolas
Issue Date:2005
Series/Report no.:IZA Discussion paper series 1480
Abstract:Several theoretical contributions, starting with McElroy and Horney (1981) and Manser and Brown (1980), have suggested to model household behavior as a Nash-bargaining game. Since then, very few attempts have been made to operationalize cooperative models of household labor supply for policy analysis. In this paper, we implement a Nash-bargaining model with external threat points (divorce) into the microsimulation of tax policy reforms in France. Following the suggestion of McElroy (1990) to achieve identification, we assume that the observation of single individuals can be used to predict outside options. Individual preferences in couples are allowed to display caring between spouses and are simulated in a way which guarantee consistency with the Nash bargaining setting, regularity conditions and observed behaviors. An extensive sensitivity analysis is provided in order to examine the various implications from using the cooperative model for tax policy analysis and the likely role of taxation on intra-household negotiation.
Subjects:collective model
Nash-bargaining model
intrahousehold allocation
household labor supply
tax reform
microsimulation
JEL:D11
J22
H31
C71
D12
C52
C25
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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