Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise

Olivier Bargain and Nicolas Moreau

No 1451, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The literature on household behavior contains hardly any empirical research on the within-household 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.

Keywords: household labor supply; intrahousehold allocation; collective model; tax reform (search for similar items in EconPapers)
JEL-codes: C71 D11 D12 H31 J22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2005-01
New Economics Papers: this item is included in nep-cmp and nep-pub
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Citations: View citations in EconPapers (4)

Published - published in: Research on Economic Inequality, 2007 (14), 317-344

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Related works:
Working Paper: Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise (2003)
Working Paper: Is the Collective Model of Labor Supply Useful for Tax Policy Analysis? A Simulation Exercise (2003)
Working Paper: Is the collective model of labor supply useful for tax policy analysis ? A simulation exercise (2002)
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