Capital Taxes, Labor Taxes and the Household
Rigas Oikonomou and
Christian Siegel
JODE - Journal of Demographic Economics, 2015, vol. 81, issue 3, 217-260
Abstract:
We study the impact of capital and labor taxation in an economy where couples bargain over the intrahousehold allocation under limited commitment. In this framework more wealth improves commitment and gives rise to insurance gains within the household. Our theory motivates these gains by the empirical observation that wealth, in contrast to labor income, is a commonly held resource within households. Based on this observation we study whether eliminating capital taxes from the economy, and raising labor taxes to balance the government’s budget, may generate welfare gains to married households. We illustrate that the quantitative effects from this reform are rather small. We attribute the small effects to the life cycle pattern of wealth accumulation and to the impact of labor income taxes on household risk sharing: In particular, we show that higher labor taxes may make the limited commitment friction more severe, even though they may make the distribution of labor income more equitable within the household.
Keywords: Life cycles models; Incomplete financial markets; Tax reform; Intrahousehold allocations (search for similar items in EconPapers)
JEL-codes: D13 D52 E21 E62 H31 (search for similar items in EconPapers)
Date: 2015-09-01
References: Add references at CitEc
Citations: View citations in EconPapers (3)
Downloads: (external link)
http://dx.doi.org/10.1017/dem.2015.7 (application/pdf)
Related works:
Journal Article: CAPITAL TAXES, LABOR TAXES AND THE HOUSEHOLD* (2015) 
Working Paper: Capital Taxes, Labor Taxes and the Household (2014) 
Software Item: Codes and data files for “Capital Taxes, Labor Taxes and the Household” 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvde:v:81:y:2015:i:3:p:217-260
Access Statistics for this article
More articles in JODE - Journal of Demographic Economics from Cambridge University Press Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Sebastien SCHILLINGS ().