Review of Economics of the Household

, Volume 4, Issue 2, pp 129-158

First online:

The Working Families’ Tax Credit and Some European Tax Reforms in A Collective Setting

  • Michal MyckAffiliated withIFSDIW Email author 
  • , Olivier BargainAffiliated withIZACHILD
  • , Miriam BebloAffiliated withZEW
  • , Denis BeningerAffiliated withZEW
  • , Richard BlundellAffiliated withIFSUCL
  • , Raquel CarrascoAffiliated withUniversidad Carlos III
  • , Maria-Concetta ChiuriAffiliated withCHILDUniversità di Bari
  • , François LaisneyAffiliated withZEWBETA-Theme, ULP
  • , Valérie LecheneAffiliated withIFSWadham College
    • , Ernesto LongobardiAffiliated withUniversità di Bari
    • , Nicolas MoreauAffiliated withIFSGREMAQ and LIRHE
    • , Javier Ruiz-CastilloAffiliated withUniversidad Carlos III
    • , Frederic VermeulenAffiliated withIFSTilburg University

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A framework for simplified implementation of the collective model of labor supply decisions is presented in the context of fiscal reforms in the UK. Through its collective form the model accounts for the well known problem of distribution between wallet and purse, a broadly debated issue which has so far been impossible to model due to the limitations of the unitary model of household behavior. A calibrated data set is used to model the effects of introducing two forms of the Working Families’ Tax Credit. We also summarize results of estimations and calibrations obtained using the same methodology on data from five other European countries. The results underline the importance of taking account of the intrahousehold decision process and suggest that who receives government transfers does matter from the point of view of labor supply and welfare of household members. They also highlight the need for more research into models of household behavior.


Collective models Fiscal reforms Household labor supply Intrahousehold allocation

JEL Classification

D11 D12