Welfare Analysis of Fiscal Reforms: Does the Representation of the Family Decision Process Matter? Evidence for Germany

We compare results of a tax reform analysis obtained with the collective and unitary models of household behaviour. We simulate real world microdata by means of a collective approach, using a compound procedure of estimation and calibration based on the 1998 wave of the German socio-economic panel. We estimate a unitary model on this `collective' data set. Investigating a move from joint to individual taxation on the basis of both models, we obtain important discrepancies between predicted adjustments to labour supply and distortions in the welfare analysis of the reform on the basis of unitary estimates.

Beninger, Denis, François Laisney and Miriam Beblo (2007), Welfare Analysis of Fiscal Reforms: Does the Representation of the Family Decision Process Matter? Evidence for Germany, Journal of Population Economics 20(4) , 869-893