Taxation and the Household

Previous analyses of demand systems and the welfare effects of taxing male and female labour supplies suppress the analysis of household resource allocation by assuming a household utility function. To analyse the implications of assuming this is not the case, we construct a simple but fairly general model of household resource allocation and use the properties of the equilibrium of this model to characterise the effects of tax policy on individual utilities, as determined by the household resource allocation proces

Taxation and the Household

Previous analyses of demand systems and the welfare effects of taxing male and female labour supplies suppress the analysis of household resource allocation by assuming a household utility function. To analyse the implications of assuming this is not the case, we construct a simple but fairly general model of household resource allocation and use the properties of the equilibrium of this model to characterise the effects of tax policy on individual utilities, as determined by the household resource allocation process

Optimal Fertility Decisions in a Life Cycle Model

This model is the first to solve for the optimal timing of childbirth and number of children in a continuous time framework simultaneously. The model depicts how changes in wage at different stages of an individual’s life influence the timing decision of childbirth and the optimal number of children. When a woman wants to have more children, she decides to have them at a younger age. Medical research that extends the fecund life span induces women to have fewer children. A reduction of the parental leave due to daycare centers or a reduction in the costs of leave due to child benefits increase the number of children. Women value labour more, when they face the risk of an unknown divorce. This paper also shows that divorce does not change the timing of childbirth directly, it influences the number of children negatively and the reduced number of children delays the timing. The model can be used to predict upper bound fertility rates, when the expected divorce rate continues to increase

Life Cycle Time Allocation and Saving in an Imperfect Capital Market

This paper combines income and expenditure with time use data to provide a unique picture of the time paths of labour supplies, saving and full consumption for two-adult households over the life cycle. These data are used to test the life cycle model presented in the paper, at the core of which is the hypothesis that households face a borrowing interest rate that rises sharply with the amount of non collateral based borrowing. The household members jointly choose time paths of time use, consumption and saving over their life cycle in the face of this capital market imperfection. This model explains the data much better than does the alternative hypothesis of a perfect capital market. Finally, households are shown to differ significantly in their saving behaviour in a way that depends on secondary earner labour supply, with a strong positive association between saving and the secondary earner's income.saving; labour supply; imperfect capital market; life cycle

Genetic testing, income distribution and insurance markets, CHERE Working Paper 2006/3

This paper analyses the policy implications for health insurance markets of the development of genetic testing. A central issue surrounding this development is whether insurers should be allowed access to the information provided by such tests. The paper first shows that on efficiency grounds alone, insurance buyers should be allowed voluntarily to supply this information to insurers. The source of the considerable opposition to this proposal is really the distributional implications: those with the worst genetic endowments will as a result have to pay the highest insurance premiums. The paper then goes on to analyse possible redistributional policies that can remedy this. In doing so, it makes a significant departure from the mainstream literature on adverse selection in insurance markets, by assuming that individuals have differing income endowments.health insurance, genetic testing

Relational Contracts, Taxation and the Household

This paper applies the theory of relational contracts to make precise the idea that because households are engaged in a repeated non-cooperative game, Pareto efficient outcomes can be supported by self interest, given the specific pattern of specialisation and exchange which exists in the household. The household's choice of a particular solution from the resulting feasible set is found by the maximisation of a household welfare function, a generalisation of a suggestion originally made by Samuelson. This nests as special cases the objective functions used in currently popular models of households engaged in one-shot cooperative games. We take a specific example of such a household welfare function, characterise the determinants of the household utility distribution, and then apply the model to examine the effects of a move from joint to individual taxation. We show that on standard stylised facts, secondary earners are always better off absolutely, and define the conditions under which they will also be so relatively. This confirms the conclusions from models which concern themselves only with the across-household welfare distribution.relational contracts, households, allocations, taxation, welfare distribution