Does Taxation Affect Intrahousehold Distribution? A Simulation Approach

Abstract

The literature on household behavior contains hardly any empirical research on the within-household distributional effects 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 essentially 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 distributional effects captured by the collective model would be significant only for reforms both radical and of extended scope.

Citation

Bargain, O. and Moreau, N. (2007), "Does Taxation Affect Intrahousehold Distribution? A Simulation Approach", Bishop, J. and Amiel, Y. (Ed.) Inequality and Poverty (Research on Economic Inequality, Vol. 14), Emerald Group Publishing Limited, Leeds, pp. 317-344. https://doi.org/10.1016/S1049-2585(06)14015-6