On the Optimality of Joint Taxation with Household Production

24 Pages Posted: 29 Nov 2001

See all articles by Henrik Jacobsen Kleven

Henrik Jacobsen Kleven

University of Copenhagen - Economic Policy Research Unit (EPRU)

Claus Thustrup Kreiner

University of Copenhagen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 2001

Abstract

The existing literature suggests that the concern for economic efficiency calls for individual taxation of married couples with a higher rate on the primary earner. This paper reconsiders the choice of tax unit in the Becker model of household production, which includes previous analyses as special cases. In the general framework, where all utility yielding commodities are produced through a combination of market goods and household time, optimal taxation requires joint taxation of the family. This result assumes that there are no restrictions in the use of commodity taxes. In the presence of such restrictions individual taxation is typically optimal. However, this may call for a lower rate on primary earners, unlike the standard result.

Keywords: Optimal Taxation, Household Production, Time Allocation

JEL Classification: H21, D13, J22

Suggested Citation

Kleven, Henrik Jacobsen and Kreiner, Claus Thustrup, On the Optimality of Joint Taxation with Household Production (November 2001). Available at SSRN: https://ssrn.com/abstract=292235 or http://dx.doi.org/10.2139/ssrn.292235

Henrik Jacobsen Kleven (Contact Author)

University of Copenhagen - Economic Policy Research Unit (EPRU) ( email )

University of Copenhagen, Building 26
Øster Farimagsgade 5
Copenhagen K., DK-1353
Denmark
+45 35 32 44 15 (Phone)
+45 35 32 30 00 (Fax)

Claus Thustrup Kreiner

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark
+45 35 32 30 20 (Phone)
+45 35 32 30 00 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany