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Intrahousehold inequality and the joint taxation of household earnings

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  • Alves, Cassiano Breno Machado
  • Costa, Carlos Eugênio da
  • Moreira, Humberto Ataíde
Abstract
We study the optimal design of nonlinear labor income tax for multiperson households. Each household consists of two workers with different productivity levels and unequal access to the family’s economic resources. We show how intrahousehold inequality, together with individual-oriented utilitarianism, generally leads to a misalignment between the household’s and government’s objectives, a state known as dissonance. We handle the multidimensionality that plagues the Mirrlees model by restricting preferences to be identical and iso-elastic and by focusing on taxes characterized by incomesplitting. This approach allows us to provide a complete solution for the screening problem, incorporate different degrees of assortative matching, and assess the role of dissonance in shaping the optimal tax schedule. We also investigate the welfare gains from gender-based policies.

Suggested Citation

  • Alves, Cassiano Breno Machado & Costa, Carlos Eugênio da & Moreira, Humberto Ataíde, 2021. "Intrahousehold inequality and the joint taxation of household earnings," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 825, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    • Handle: RePEc:fgv:epgewp:825
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    Cited by:

    1. Takuya Obara & Yoshitomo Ogawa, 2025. "Optimal Nonlinear Income Taxation for Non-Cooperative Couples," Discussion Paper Series 291, School of Economics, Kwansei Gakuin University, revised Jun 2025.
    2. Alves, Cassiano Breno Machado & Costa, Carlos Eugênio da & Moreira, Humberto Ataíde, 2021. "Intrahousehold inequality and the joint taxation of household earnings," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 825, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    3. Alves, Cassiano B. & da Costa, Carlos E. & Lobel, Felipe & Moreira, Humberto, 2024. "Intrahousehold inequality and the joint taxation of household earnings," Journal of Public Economics, Elsevier, vol. 239(C).

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    More about this item

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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