Optimal Taxation, Child Care and Models of the Household

36 Pages Posted: 5 Feb 2014

See all articles by Patricia F. Apps

Patricia F. Apps

The University of Sydney - Faculty of Law; IZA Institute of Labor Economics

Ray Rees

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); University of Sydney Law School

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Date Written: January 30, 2014

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 labor supply, and of the resulting relationship between household income and the well-being 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.

Keywords: optimal taxation, labour supply, time use, child care, household production, inequality

JEL Classification: H210, J220, H310, H240

Suggested Citation

Apps, Patricia F. and Rees, Ray, Optimal Taxation, Child Care and Models of the Household (January 30, 2014). CESifo Working Paper Series No. 4578, Available at SSRN: https://ssrn.com/abstract=2390591 or http://dx.doi.org/10.2139/ssrn.2390591

Patricia F. Apps

The University of Sydney - Faculty of Law ( email )

Faculty of Law, New Law Building F10
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9351 0241 (Phone)
+61 2 9351 0200 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ray Rees (Contact Author)

Ludwig Maximilian University of Munich (LMU) - Faculty of Economics ( email )

Munich, D-80539
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

University of Sydney Law School ( email )

Sydney
Australia

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