Wives’ Labor Supply and Taxation: a Conditional Preferences Approach

In the context of the unitary model of household labour supply we test whether the husband’s work is separable from consumption and the wife’s work. We apply a conditional preferences approach to derive a conditional labor supply function for the wife consistent with a unitary model with nonseparable preferences. Our main results are that consumption and wife’s work hours are not separable from the husband’s labour supply. Furthermore we find that the wife’s and husband’s work hours are complements when men tend to work longer hours than a typical full-time contract.conditional preferences; non-separability; income taxation; married women labor supply

Retirement and Fixed Costs to Work: An Empirical Analysis

In this paper we study consumption around the age of retirement. We consider a model where consumption and leisure are non-separable and retirement is endogenous. We consider the case where non-separabilities come from the existence of fixed costs to work. We show that the existence of unobserved heterogeneity related to these non-separabilities will lead to biases of the OLS estimators of structural parameters of demand systems conditioned on retirement. These estimates give bounds to the true fixed costs. We estimate the model with French data and compute the bounds of these structural parameters.retirement; fixed costs to work; correlated random coefficient model; bias

A Note on the Correlated Random Coefficient Model

In this note we derive the bias of the OLS estimator for a correlated random coefficient model with one random coefficient, but which is correlated with a binary variable. We provide set-identification to the parameters of interest of the model. We also show how to reduce the bias of the estimator.correlated random coefficient model; bias; discrete choice

Motives for Transfers from Parents to Children: Tests with First-Time Homeowners’ Data

There are good theoretical reasons why transfers from parents are likely to be important around the time of the first home purchase. Transactions costs associated with trading houses make people with increasing income paths prefer to buy a house that is more expensive than what matches their current income. This together with a down-payment constraint make some first-time house owners borrow to the limit and run down liquid assets at purchase thereby making them vulnerable to adverse income shocks. Intergenerational transfers can alleviate these constraints. Moreover, previous papers have suggested that transfers from parents to children are significant exactly around the time where children buy their first home. Using a panel data set issued from Danish administrative registers with information about wealth of a sample of first-time homeowners and their parents, we document that child and parent resources, house value as well as financial resources are correlated. We then go on to test if there are direct parental transfers targeted to the purchase of the house, and in case of an unemployment spell during the years after the purchase where children typically hold little liquid assets. We also test whether children consider parental wealth as part of their own precautionary savings. We do not find strong evidence of any of these hypotheses.intergenerational transfers; home purchase; saving; empirical analysis

The Redistributive Impact of Alternative Income Maintenance Schemes: A Microsimulation Study using Swiss Data

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty, is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62% is required to make it viable. Aggregate work hours are reduced by approximately 10% and average disposable income falls by 9.3% under such circumstances. A participation income restricted to adults in employment and covering 50% of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.income maintenance, negative income tax, microsimulation, income redistribution

The Redistributive Impact of Alternative Income Maintenance Schemes: A Microsimulation Study using Swiss Data

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty, is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62% is required to make it viable. Aggregate work hours are reduced by approximately 10% and average disposable income falls by 9.3% under such circumstances. A participation income restricted to adults in employment and covering 50% of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland. (Revised in July 2007)income maintenance, negative income tax, microsimulation, income redistribution