Optimal Taxation, Child care and Models of the Household

By Ray Rees and Patricia Apps

CESifo Working Paper No. 4578, January 2014

CESifo Working Paper No. 4578


This paper presents 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 between second earner wage differences, variation in the price of child care and domestic productivity differences as determinants of across-household heterogeneity in second earner labour supply, and of the resulting relationship between household income and the wellbeing of household members. 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.


Published Feb. 16, 2015 11:02 AM - Last modified Aug. 6, 2021 9:53 AM