Working Paper: NBER ID: w13503
Authors: Edgar Cudmore; John Piggott; John Whalley
Abstract: In this paper we analyze income tax design in a two member household labor supply model where time spent on consumption together by the two household members is valued differently from time spent apart. We treat consumption as a non excludable public good to members of the household; one example would be where all household members or one alone can watch TV. When jointly consumed, however, TV services are valued more highly than the same consumption undertaken separately. We use this model to numerically investigate the welfare implications of different tax structures. In sharp contrast to existing literature, our results suggest the desirability of subsidizing secondary worker's labor supply. We also relate our discussion to existing individual-household tax unit literature.
Keywords: No keywords provided
JEL Codes: J22; J48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| optimal income tax design should differentiate between joint and non-joint leisure time (H31) | subsidizing secondary workers' labor supply is desirable (J68) |
| subsidizing secondary workers' labor supply is desirable (J68) | increasing labor supply of secondary workers enables primary workers to reduce their labor supply (J22) |
| increasing labor supply of secondary workers enables primary workers to reduce their labor supply (J22) | increasing joint consumption time (D15) |
| optimal income tax design should differentiate between joint and non-joint leisure time (H31) | increasing joint consumption time (D15) |