Normative evaluation of tax policies: from households to individuals

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Normative Evaluation of Tax Policies: From Households to IndividualsOlivier Bargain In this paper, we analyze the impact of a tax policy change on social welfare by using jointly a collective model of household labor supply and a microsimulation program of the French taxbenefit system. The collective approach allows studying the intrahousehold distribution so that for the first time, social welfare can be characterized using individual utilities rather than an ambiguous concept of household welfare. This way, the planner's preferences address not only inter-household inequalities but also intra-household inequalities often neglected in the literature. The other contribution of the paper derives from a larger interpretation of labor supply behaviors which represent more than the simple work duration and incorporate unobserved dimensions related to effort or intensity at work. We simulate an extended version of the British Working Family Tax Credit on married couples in France. Two types of conclusions emerge. First, the reform is not desirable for low values (utilitarian) or high values (rawlsian) of the social inequality aversion but rather for an intermediary range. In effect, on the efficiency side, the reform induces strong disincentive effects on the participation of second-earners while on the equity side, it does not specifically target the poorest households. Second, we show that the choice of unit -household or individualstrongly condition the results of the normative analysis when departing in a reasonable way from the assumption of equal sharing within the household. D I S C U S S I O N P A P E R S E R I E SJEL Classification: C71, D13, D31, D63, H21, H31, J22

Tax-benefit systems and the gender gap in income

“…They find that the equalising effect of benefits is higher than that of taxes but find large variability across countries and groups within the population. In a different context, structural models have been developed to analyse the impact of tax-benefit policy on labour supply and welfare within couples (Bargain 2008;Immervoll et al 2011;Bastani 2013). These analyses are typically conducted in an ex-ante framework but some research also attempts to validate the findings from structural models in an ex post setting using reduced-form models (Blundell 2005;Cai et al 2008).…”

Tax-Benefit Systems and the Gender Gap in Income

“…They find that the equalising effect of benefits is higher than that of taxes but find large variability across countries and groups within the population. In a different context, structural models have been developed to analyse the impact of taxbenefit policy on labour supply and welfare within couples (Bargain, 2008;Immervoll, Kleven, Kreiner, & Verdelin, 2011;Bastani, 2013).…”

The gender impact of Irish budgetary policy 2008-2018

“…Gallego-Granados and Geyer (2015) went a little further and combined decomposition methods, tax-benefit simulation and structural labour supply estimation to map relationships between the gross gender wage gap, the tax-benefit system and the net gender wage gap in Germany. In a different context, structural models have been developed to analyse the impact of tax-benefit policy on labour supply and welfare within couples (Bargain, 2008;Immervoll et al, 2011;Bastani, 2013), or for women specifically (Blundell et al, 2016).…”