Abstract
We compare results of a tax reform analysis obtained with the collective and unitary models of household behaviour. We simulate real world micro-data by means of a collective approach, using a compound procedure of estimation and calibration based on the 1998 wave of the German socio-economic 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.
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Acknowledgements
We are grateful for comments and advice from Richard Blundell, Martin Browning, Pierre-André Chiappori, Valérie Lechene, Costas Meghir, Nathalie Picard, Frederic Vermeulen, and all participants in the one-year project “Welfare analysis of fiscal and social security reforms in Europe: does the representation of family decision processes matter?” This project was partly financed by the EU, General Directorate Employment and Social Affairs, under grant VS/2000/0778. Thanks also to Olivier Bargain, Stefan Boeters, Bernhard Boockmann, Hermann Buslei, Peter Jacobebbinghaus, Nicolas Moreau for careful reading of preliminary versions. The comments of an Editor and two anonymous referees are also gratefully acknowledged. All errors remain our own.
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Appendix
Estimation results for the unitary model
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Beninger, D., Laisney, F. & Beblo, M. Welfare analysis of a tax reform for Germany: a comparison of the unitary and collective models of household labour supply. J Popul Econ 20, 869–893 (2007). https://doi.org/10.1007/s00148-006-0077-8
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DOI: https://doi.org/10.1007/s00148-006-0077-8