Comparison between unitary and collective models of household labor supply with taxation

Several recent papers have shown the relevance of collective models for the empirical investigation of household labor supply and consumption. Yet the estimation of collective models in the presence of non-linear budget sets and participation decisions remains a daunting task. This paper compares collective and unitary models on the basis of simulated collective data with income taxation. We distinguish the cases of individual and joint taxation. Estimating the unitary model we obtain strikingly different ?preference? parameters depending on the type of taxation. We also obtain substantial differences between predicted adjustments to labor supply following a switch between tax regimes, and hence potentially wide-ranging definitions of revenue-neutral versions of tax reforms. Finally we discuss distortions affecting the welfare analysis of reforms on the basis of unitary estimates when the model generating the data is a collective model. The results suggest that increased efforts should be devoted to the estimation of collective models with taxation. --Pareto optimal allocation,tax reform,simulated data

On the performance of unitary models of household labor supply estimated on “collective” data with taxation

This paper compares collective and unitary models on the basis of simulated collective data with income taxation. We distinguish the cases of individual and joint taxation. Estimating a flexible unitary model, we obtain strikingly different “preference” parameters depending on the type of taxation. We also obtain substantial differences between predicted adjustments to labor supply following a switch between tax regimes. Our results show that even the design of revenue-neutral reforms may be heavily distorted by the use of a unitary model on collective data. Finally, we discuss distortions affecting the welfare analysis of reforms on the basis of unitary estimates when the model generating the data is a collective model. The results suggest that increased efforts should be devoted to the estimation of collective models with taxation.Pareto optimal allocations, policy evaluation, simulated data

The perception of the income tax: Evidence from Germany

The paper explores whether the tax rule defined by the tax law or the perception of the tax system by the single household matters in explaining household behaviour. In particular, Germany applies joint taxation with marital splitting to married couples. However, the couple has the choice between two formulas when paying the tax. In both cases, the perceived marginal tax rate, i.e. the rate which practically applies, and the real one, i.e. the one calculated from the tax function, differ systematically. Using the 2004 wave of the German Socio-Economic Panel, we find that (i) the perceived marginal tax rate is a better indicator than the real one when explaining the couples' behaviour, (ii) there is a correlation between income pooling and the system of tax collection chosen by the couple, and (iii) the intra-household bargaining rule depends on the specificities of the tax system

Experimental Evidence on Bargaining Power Within Couples

We conducted an experiment on the nature of income sharing within 95 established couples in Germany. In a first step, the partners revealed their individual preferences by making consumption choices independently. In a second step, decisions were taken jointly over five different rounds with varying resource allocations between the partners. From this design we are able to derive a female bargaining power index without structural restrictions, reflecting the sharing rule within the couple. We observe this index to increase significantly with the female partner s money allocation. This effect is robust to the inclusion of socio-economic, distributional and behavioural features of the couple

Measuring Selectivity-Corrected Gender Wage Gaps in the EU

We investigate different techniques to assess the gender pay gap in five EU countries (France, Germany, Italy, Spain and United Kingdom), focusing on self-selection into market work. Results show that selectivity correction has an impact on both wage estimates and wage gap decomposition. If there is a positive correlation between the wage and the propensity to participate, the estimated pay gap understates the true difference in earnings when self-selection is ignored. The estimated pay gap differs considerably at different quantiles of the wage distribution, and is sensitive to the choice of estimator. --

Comparison Between Unitary and Collective Models of Household Labor Supply With Taxation

Several recent papers have shown the relevance of collective models for the empirical investigation of household labor supply and consumption. Yet the estimation of collective models in the presence of non-linear budget sets and participation decisions remains a daunting task. This paper compares collective and unitary models on the basis of simulated collective data with income taxation. We distinguish the cases of individual and joint taxation. Estimating the unitary model we obtain strikingly different 'preference' parameters depending on the type of taxation. We also obtain substantial differences between predicted adjustments to labor supply following a switch between tax regimes, and hence potentially wide-ranging definitions of revenue-neutral versions of tax reforms. Finally we discuss distortions affecting the welfare analysis of reforms on the basis of unitary estimates when the model generating the data is a collective model. The results suggest that increased efforts should be devoted to the estimation of collective models with taxation

Family Tax Splitting : A Microsimulation of its Potential Labour Supply and Intra-household Welfare Effects in Germany

This paper assesses the effects that an introduction of the French family splitting mechanism would have on German families labour supply and intra-household consumption behaviour. We use simulated real world microdata created by means of a deterministic collective labour supply model. The data are generated by a compound procedure of estimation and calibration based on GSOEP data. In a microsimulation the present tax-benefit system with child benefit/allowance is replaced by a tax scheme with family splitting. The resulting changes in labour supply are surprisingly small, even for women. Welfare effects are also modest, but differ for husbands and wives

Welfare Analysis of Fiscal Reforms : Does the Representation of the Family Decision Process Matter? Evidence for Germany

This paper compares predictions obtained for the analysis of tax reforms with collective and unitary models of household labour supply and consumption behaviour. We simulate real world microdata by means of a collective approach, using a compound procedure of estimation and calibration based on the 1998 wave of the German socioeconomic panel. We estimate a unitary model on this collective data set. Investigating a move from joint to individual taxation on the basis of both models, we obtain important discrepancies between predicted adjustments to labour supply and distortions in the welfare analysis of the reform on the basis of unitary estimates. These results suggest that increased efforts should be devoted to the estimation of collective models with taxation

Emploi et social en France: Description et évaluation

La première affirmation résume de manière péremptoire la description d’une France où le quart de la population active travaillerait pour un service public pléthorique incapable de se réformer, où les salaires sont fixés par une grille rigide et le statut « privilégié », une France où le travailleur et le citoyen seraient surprotégés par des législations du travail et sociale généreuses mais étouffantes. Pourtant la France vient de vivre une période (1998-2001) pendant laquelle 400.000 emplois par an furent créés, malgré une croissance, certes élevée, mais non exceptionnelle. Cette performance macroéconomique, la meilleure en Europe après l’Espagne, n’a eu de précédent en France que lors de circonstances particulières : 7% de croissance en 1969, année de l’après mai 1968 et d’une importante dévaluation et 1963, année suivant la fin de la guerre et le rapatriement des réfugiés d’Algérie (Pisani-Ferry, 2000). La phrase polémique du Président de la République se base sur un rapport de la Commission Européenne plaçant la France au douzième rang en terme de richesse par habitant dans l’Union Européenne. Toutefois un rapport de l’OCDE indique que la richesse produite par heure de travail par l’actif français est la plus élevée au monde. La contradiction n’est ici qu’apparente. D’une part la France fait preuve d’un certain dynamisme démographique. D’autre part le Français arrive tardivement sur le marché de l’emploi et part précocement à la retraite. De plus le contingent d’heures travaillées annuel est relativement faible

Emploi et social en France: Description et évaluation

La première affirmation résume de manière péremptoire la description dune France où le quart de la population active travaillerait pour un service public pléthorique incapable de se réformer, où les salaires sont fixés par une grille rigide et le statut « privilégié », une France où le travailleur et le citoyen seraient surprotégés par des législations du travail et sociale généreuses mais étouffantes. Pourtant la France vient de vivre une période (1998-2001) pendant laquelle 400.000 emplois par an furent créés, malgré une croissance, certes élevée, mais non exceptionnelle. Cette performance macroéconomique, la meilleure en Europe après lEspagne, na eu de précédent en France que lors de circonstances particulières : 7% de croissance en 1969, année de laprès mai 1968 et dune importante dévaluation et 1963, année suivant la fin de la guerre et le rapatriement des réfugiés dAlgérie (Pisani-Ferry, 2000). La phrase polémique du Président de la République se base sur un rapport de la Commission Européenne plaçant la France au douzième rang en terme de richesse par habitant dans lUnion Européenne. Toutefois un rapport de lOCDE indique que la richesse produite par heure de travail par lactif français est la plus élevée au monde. La contradiction nest ici quapparente. Dune part la France fait preuve dun certain dynamisme démographique. Dautre part le Français arrive tardivement sur le marché de lemploi et part précocement à la retraite. De plus le contingent dheures travaillées annuel est relativement faible. --