Feminist Legal Studies Queen's

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Feminist Legal Studies Queen's

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'The Behavioural Effects of "Joint" Tax and Benefit Laws on Women's Economic Lives'

This paper examins the effects of changes in the personal income tax and benefit system on female (common-law) spouses' welfare and labour supply under different assumptions of family bargaining. Spouses work in employment and household production in each of two periods, and a spouse's first-period labour supply influences his or her second period wage rate. A change in a couple's tax rates changes the couple's economic opportunities. In order to evaluate the utility of each spouse before and after the changes in the tax schedule, the paper draws on bargaining theory to examine how husband and wife share family resources. The recent literature on economics of the family often employs models of cooperative bargaining to capture intrafamily distribution: While both spouses cooperate to maximize the size of the pie (being on the Pareto frontier of the utility possibility set), husband and wife have conflicting ideas of how to share it (selecting a point on the utility possibility frontier). A bargaining solution offers a compromise between the husband's and wife's conflicting views, in which the utility of each spouse should negotiations break down (the disagreement point or threat point) plays an important role. If the threat point is non-cooperative marriage, then the tax treatment of couples is the relevant tax factor in the determination of that threat point. Conversely, if the threat point is divorce, then the tax treatment of singles is the key tax-related determinant of that threat point. A change from bargaining over life-time utility to period-by-period bargaining or a change from a divorce threat point to a threat point determined by non-cooperative marriage changes the assessment of labour supply and intrafamily distributional effects of personal income taxation.

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