Optimal taxation with household production

Henrik Jacobsen Kleven, Wolfram F. Richter, Peter Birch Sørensen

Research output: Contribution to journalArticlepeer-review

43 Scopus citations

Abstract

This paper suggests that the optimal tax system should favour market-produced services which are close substitutes for home-produced services. First, we modify the classical Corlett-Hague rule for optimal commodity taxation by showing that it may be optimal to impose a relatively low tax rate on consumer services even if such services are complements to leisure. Second, we find that when services and other goods are equally substitutable for leisure, so that uniform commodity taxation would be optimal in the absence of home production, the optimal tax structure will certainly involve a relatively low tax rate on consumer services.

Original languageEnglish (US)
Article number520584
Pages (from-to)584-594
Number of pages11
JournalOxford Economic Papers
Volume52
Issue number3
DOIs
StatePublished - Jul 1 2000
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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