Household bargaining, spouses’ consumption patterns and the design of commodity taxes

Abstract We study optimal commodity taxes under household bargaining. We focus on the taxation of ‘female’ and ‘male’ products. The expressions for the tax rates include Pigouvian and incentive terms. When the female spouse has the lower bargaining weight, the Pigouvian term calls for a subsidizatio...

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Bibliographic Details
Published in:Oxford economic papers 2021-01, Vol.73 (1), p.225-247
Main Authors: Cremer, Helmuth, Lozachmeur, Jean-Marie, Roeder, Kerstin
Format: Article
Language:English
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Summary:Abstract We study optimal commodity taxes under household bargaining. We focus on the taxation of ‘female’ and ‘male’ products. The expressions for the tax rates include Pigouvian and incentive terms. When the female spouse has the lower bargaining weight, the Pigouvian term calls for a subsidization of the ‘female good’, and a taxation of the ‘male good’. The incentive term depends on the distribution of bargaining weights across couples. When the bargaining weight of the female spouse increases with wages, the female good will be consumed in larger proportion by more productive couples. In this case the Pigouvian term is mitigated.
ISSN:0030-7653
1464-3812
DOI:10.1093/oep/gpz060