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Wives, husbands and wheelchairs: Optimal tax policy under gender-specific health

Marie-Louise Leroux 1, Grégory Ponthière 2, 3

(2009-11)

We study the optimal taxation problem in an economy composed of two-person households (men and women), where agents influence their own old-age dependency prospects through health spending. It is shown that the utilitarian social optimum can be decentralized by means of lump sum transfers from men to women, because women exhibit a higher disability-free life expectancy than men for a given level of health spending. Once self-oriented concerns for coexistence are introduced, the decentralization of the first-best requires also gender-specific subsidies on health spending aimed at internalizing the effect of each agent's health on the spouse's welfare. In the presence of singles in the population, the optimal policy requires also a differentiated subsidization of health spending for singles and couples. Finally, under imperfect observability of couples, the incentive compatibility constraints reinforce the need for subsidization of health spendings.

1:	Center of Operation Research and Econometrics [Louvain] (CORE)
	Université Catholique de Louvain (UCL) - Belgique
2:	Ecole d'Économie de Paris - Paris School of Economics (EEP-PSE)
	Ecole d'Économie de Paris
3:	Paris-Jourdan Sciences Economiques (PSE)
	CNRS : UMR8545 – École des Hautes Études en Sciences Sociales [EHESS] – Ecole des Ponts ParisTech – Ecole normale supérieure de Paris - ENS Paris

Subject

:

Humanities and Social Sciences/Economy and finances

Keyword(s): Long term care – optimal taxation – preventive health spending – gender differentials – old age dependency

halshs-00575059, version 1

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From: Caroline Bauer <>

Submitted on: Wednesday, 9 March 2011 14:51:31

Updated on: Wednesday, 9 March 2011 15:37:26