On the Taxation of Trade Within and Between Households
Patricia F. Apps
University of Sydney - Faculty of Law; IZA Institute of Labor Economics
Ludwig Maximilian University of Munich - Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute)
CES Working Paper at Univ. of Munich No. 146
Tax reform proposals affect individual welfares in ways which strongly depend on the nature of specialization in household production and the pattern of trade within households. Variation in the degree of specialization in domestic production across households strongly influences the impacts on individual tax burdens of a given tax reform. The standard models of the economics literature cannot be used to analyze these issues because they ignore the two-person nature of households and the existence of household production and trade. This paper proposes a simple and tractable model to remedy this and uses it to analyze the impacts of the types of tax reform that have been the subject of recent policy debate.
JEL Classification: H21, H31, J22
Date posted: February 24, 1998