Abstract
AbstractWhether couples pool their resources and behave like a unit or spend their income individually is crucial for social and tax policy. In this paper, I provide a test of the income pooling hypothesis using administrative cross-sectional survey data on expenditures and individual incomes of couple households in Germany. The test is performed within the quadratic almost ideal demand system framework, which allows for an endogenous expenditure budget and endogenous individual income contribution shares in an instrumental variables approach. Although perfect income pooling is broadly rejected, there are significant differences regarding the marital status, the presence of at least one child in the household and whether the household is located in a former West or East German federal state. Married and unmarried couples with children are closer to the acceptance of the hypothesis than couples without children. The approach allows to calculate justifiable differentials of the marginal tax rates within the household if income pooling is rejected.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.