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The Collective Household, Household Production and Efficiency of Marginal Reforms

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  • SAM ALLGOOD

Abstract

Most research on the welfare properties of taxes employs the unitary model of the household, ignoring household production. A simple model provides expressions for the changes in individual utility given marginal reforms to government policy. It is shown that the burden of a higher tax on household goods falls on the household member that consumes more than they produce or purchase. Numerical calculations show that price substitution (complementarity) between home and market labor increases (decreases) aggregate efficiency costs of a marginal redistribution of income without impacting the intra‐household distribution of utility changes. Modeling household goods as public versus private can alter the distributional consequences of marginal reforms.

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  • Sam Allgood, 2009. "The Collective Household, Household Production and Efficiency of Marginal Reforms," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 11(5), pages 749-771, October.
    • Handle: RePEc:bla:jpbect:v:11:y:2009:i:5:p:749-771
    DOI: 10.1111/j.1467-9779.2009.01428.x
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    2. Olivier Bargain & Olivier Donni, 2014. "Optimal Commodity Taxation and Redistribution within Households," Economica, London School of Economics and Political Science, vol. 81(321), pages 48-62, January.

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