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

Abstract:

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.

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Published Feb. 16, 2015 11:02 AM - Last modified Oct. 27, 2017 1:02 PM