Optimal Taxation, Child Care and Models of the Household

Patricia Apps () and Ray Rees

No 6823, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper presents for the first time the properties of optimal piecewise linear tax systems for two-earner households, based on joint and individual incomes respectively. A key contribution is the analysis of the interaction of second earner wage differences, variation in prices of bought-in inputs into household production in the form of child care, and domestic productivity differences as determinants of across-household heterogeneity in second earner labour supply. The analysis highlights the importance of the elasticity of substitution between parental and non-parental child care in determining the relationship between utility and income across households. A central result is that taking account of a richer and more realistic specification of household time use widens the set of cases in which individual taxation is welfare-superior to joint taxation.

Keywords: household production; time allocation; optimal taxation; child care; inequality; labour supply (search for similar items in EconPapers)
JEL-codes: D13 H21 H24 H31 J22 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2012-08
New Economics Papers: this item is included in nep-lma and nep-pub
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Citations: View citations in EconPapers (6)

Published - published as 'Optimal family taxation and income inequality' in: International Tax and Public Finance, 2018, 25, 1093–1128

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Related works:
Working Paper: Optimal Taxation, Child Care and Models of the Household (2014)
Working Paper: Optimal Taxation, Child Care and Models of the Household (2012)
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