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Family Taxation, Fertility, and Horizontal Equity: A Political Economy Perspective

21 Pages Posted: 4 Apr 2012  

Alessandro Balestrino

Universita di Pisa - Dipartimento di Scienze Economiche; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 30, 2012

Abstract

This paper intends to make a two-fold contribution to the literature. First, it studies a political economy model of family taxation using a household economics approach to behavior; the nature of the winning policy is found to depend on whether i) the parents control their fertility or not, ii) they value their children or not. Second, it investigates the question whether the winning policy is capable to achieve horizontal equity (i.e. the requirement that all agents who are in all "relevant" senses identical should be treated identically); it turns out that under endogenous fertility, any winning policy trivially satisfies horizontal equity, but if fertility is exogenous for some of (or all) the parents, horizontal equity is virtually impossible to satisfy. The assessment on whether a given family taxation scheme attains horizontal equity objectives cannot therefore be independent from the assessment on the nature of fertility behavior.

Keywords: family taxation, horizontal equity, fertility, political economy, median voter, family size

JEL Classification: D130, D720, H310, J130

Suggested Citation

Balestrino, Alessandro, Family Taxation, Fertility, and Horizontal Equity: A Political Economy Perspective (March 30, 2012). CESifo Working Paper Series No. 3774. Available at SSRN: https://ssrn.com/abstract=2034244

Alessandro Balestrino (Contact Author)

Universita di Pisa - Dipartimento di Scienze Economiche ( email )

Sede di Scienze Politiche, via Serafini 3
I-56126 Pisa
Italy
+39 050 221 2437 (Phone)
+39 050 221 2450 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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