published in: Journal of Public Economics, 2007, 91 (1-2), 365-385
Our paper examines the impact of tax reductions on the demand for services in the home.
For that purpose, we estimate a structural model of demand for such services by using
household individual data collected by INSEE (Paris) in 1996. In this model, the net hourly
wage paid to the domestic employee, the household preferences for consumption of in-home
services and the decision to take advantage of the tax reduction are considered as
endogenous variables. Estimation of the econometric model uses the fact that some
households are observed to consume domestic services and to take advantage of the tax
reduction, while others either consume such services but do not take advantage of the tax
reduction, or do not consume these services at all. Its identification relies on an exclusion
restriction resulting from the tax credit schedule. Results show that the probability of
consuming in-home services increases with age and income. A ten per cent increase in the
tax reduction would increase from 45.9 to 50.8 per cent the proportion of households
benefiting from the tax reduction among those who consume paid in-home services.
Moreover, 13.5 per cent of households who do not actually consume such services would do
so after the ten per cent increase in the tax reduction. These simulated variations would
mainly concern high-income households.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.