Patricia Apps

University of Sydney, Sydney, New South Wales, Australia

Are you Patricia Apps?

Claim your profile

Publications (68)18.93 Total impact

  • Patricia Apps, Yuri Andrienko, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: The existing literature on precautionary saving is based almost entirely on the assumption that the household acts as if it consisted of a single individual decision-taker. In reality saving decisions are typically taken by two-person households. This paper examines the implications of this observation for the existence of precautionary saving, and shows that the assumption that the individual utility functions satisfy the conditions for precautionary saving to exist can imply that the household exhibits precautionary saving, but only under strong assumptions on the type of risk change being considered.
    American Economic Review 01/2014; 104(3). · 2.69 Impact Factor
  • Patricia F. Apps, Silvia Mendolia, Ian Walker
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper investigates the relationship between attendance at nursery school and children's outcomes in adolescence. In particular, we are interested in child cognitive development at ages 11, 14 and 16, intentions towards tertiary education, economic activity in early adulthood, and in a group of non-cognitive outcomes, such as risky health behaviours (smoking, early pregnancy, use of cannabis) and personality traits (feelings and commitments about school; psychological well-being). Using matching methods to control for a very rich set of child's and family's characteristics, we find that pre-school childcare largely improves results in cognitive tests at age 11 and 14 and 16, and has a positive effect on intentions towards further education and economic activity at age 19-20. Positive effects are especially noticeable for children coming from disadvantaged socio-economic backgrounds. Results on non-cognitive outcomes are more mixed: we do not find any evidence of improvement in psychological well-being, but we do find some positive effects on health behaviours.
    Economics of Education Review 12/2013; · 1.07 Impact Factor
  • Source
    Patricia F. Apps, Jan Kabatek, Ray Rees, Arthur Van Soest
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper introduces a static structural model of hours of market labor supply, time spent on child care and other domestic work, and bought in child care for married or cohabiting mothers with pre-school age children. The father's behavior is taken as given. The main goal is to analyze the sensitivity of hours of market work, parental child care, other household production and formal child care to the wage rate, the price of child care, taxes, benefits and child care subsidies. To account for the non-convex nature of the budget sets and, possibly, the household technology, a discrete choice model is used. The model is estimated using the HILDA dataset, a rich household survey of the Australian population, which contains detailed information on time use, child care demands and the corresponding prices. Simulations based on the estimates show that the time allocations of women with pre-school children are highly sensitive to changes in wages and the costs of child care. A policy simulation suggests that labor force participation and hours of market work would increase substantially in a fiscal system based solely on individual rather than joint taxation.
    04/2012;
  • Source
    Patricia F. Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper presents for the first time the properties of optimal piecewise linear tax systems for two-earner households, based on joint and individual incomes respectively. A key contribution is the analysis of the interaction of second earner wage differences, variation in prices of bought-in inputs into household production in the form of child care, and domestic productivity differences as determinants of across-household heterogeneity in second earner labour supply. The analysis highlights the importance of the elasticity of substitution between parental and non-parental child care in determining the relationship between utility and income across households. A central result is that taking account of a richer and more realistic specification of household time use widens the set of cases in which individual taxation is welfare-superior to joint taxation.
    01/2012;
  • Source
    Patricia F. Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: The Mirrlees Review of the UK tax system, together with its companion volume of research papers, can be expected to influence future discussions of tax reform. Indeed, this can already be recognised in the Henry Review. As far as income taxation is concerned, the most substantive recommendation of the Mirrlees Review is a move toward a system of consumption or expenditure taxation, by exempting the "normal return" to saving and taxing only "excess returns" on the same tax schedule as labour earnings. This paper argues against this direction of reform on the grounds that it is based on a model of household behaviour over the life cycle that ignores important aspects of reality. We present an alternative model, together with supporting empirical evidence. We go on to argue that, against the background of rising inequality and an aging population, the appropriate direction for reform is towards more progressive taxation of both labour earnings and capital income, although not necessarily under the same rate scale.
    01/2012;
  • Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: A basic dilemma underlying the vast literature on the measurement of inequality is that, conceptually, we are concerned about inequality among individuals but empirically, we measure the inequality of the distribution of household income and consumption. KeywordsInequality-Income-Welfare-Policy
    09/2011: pages 57-81;
  • Source
    Patricia Frances Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: This article applies the theory of relational contracts to make precise the idea that because households are engaged in a repeated non-cooperative game, Pareto efficient outcomes can be supported by self interest, given the specific pattern of specialization and exchange that exists in the household. The household's choice of a particular solution from the resulting feasible set is found by the maximization of a household welfare function, a generalization of a suggestion originally made by Samuelson. This nests as special cases the objective functions used in currently popular models of households engaged in one-shot cooperative games. We take a specific example of such a household welfare function, characterize the determinants of the household utility distribution, and then apply the model to examine the effects of a move from joint to individual taxation. We show that on standard stylized facts, secondary earners are always better off absolutely, and define the conditions under which they will also be relatively better off. This confirms the conclusions from models that concern themselves only with the across-household welfare distribution. (JEL Codes: D11, D13, H21, H24, H31, J12, J16, K36, N30) Copyright The Author 2011. Published by Oxford University Press on behalf of Ifo Institute for Economic Research, Munich. All rights reserved. For permissions, please email: journals.permissions@oup.com, Oxford University Press.
    CESifo Economic Studies 05/2011; 57(2):245-258. · 0.62 Impact Factor
  • Source
    Patricia Frances Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: "Over recent decades, Australia's highly progressive, individual-based taxation of families has been replaced by a system that tends towards joint taxation with an inverted U-shaped rate scale. The reform has been implemented by introducing family-income-targeted child payments (now Family Tax Benefit Part A) and by lowering tax rates on higher incomes. The new system has shifted the burden of taxation to two-earner families on low and average wages and, in particular, to working married mothers as second earners. For reasons of fairness and efficiency, we propose returning to more progressive individual taxation and universal family payments." Copyright (c)2010 The University of Melbourne, Melbourne Institute of Applied Economic and Social Research.
    Australian Economic Review 05/2010; 43(2):153-175. · 0.27 Impact Factor
  • Source
    Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: Historically, in virtually all developed economies there seems to be clear evidence of an inverse relationship between female labor supply and fertility. However, particularly in the last decade or so, the relationship across countries has been positive: for example countries like Germany, Italy and Spain with the lowest fertility rates also have the lowest female participation rates. They have accepted the hypothesis that the reason for this lies in the combined effects of a country’s tax system and system of child support, and we have sought to clarify this theoretically, using an extended version of the Galor-Weil model. The results suggest that countries with individual rather than joint taxation, and which support families through improved availability of alternatives to domestic child care, rather than through direct child payments, are likely to have both higher female labor supply and higher fertility. These results are strengthened when we take account of the heterogeneity among households that undoubtedly exists. [IZA Discussion Paper No. 409]
    esocialsciences.com, Working Papers. 01/2010;
  • Source
    Patricia Apps
    [Show abstract] [Hide abstract]
    ABSTRACT: While acknowledging the importance of fairness and the need to avoid creating disincentives in the design of tax reform, the Henry Review recommends a simplified Personal Income Tax and child payments withdrawn on a single family income test. This paper shows that the proposed reforms would consolidate the existing family tax system, which clearly fails in terms of both fairness and disincentives. In the early 1980’s Australia had a highly progressive individual income tax and universal family payments. Since then family income tests on child payments and tax cuts at high income levels have transformed the system into one of joint taxation with the highest marginal rates on low and average wage two-earner families. Under the Review’s recommendations the same families would continue to face the highest tax rates. Data presented indicate strong negative effects on productivity and the tax base due to disincentive effects on labour supply and saving over the life cycle. The paper proposes a return to a strongly progressive individual based income tax and universal family payments.
    Centre for Economic Policy Research, Research School of Economics, Australian National University, CEPR Discussion Papers. 01/2010;
  • Source
    Patricia Frances Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper combines income and expenditure with time use data to provide a unique picture of the labor supply, household production, saving and consumption decisions of two-adult households over a life cycle defined in terms of the presence and ages of children. The study also draws on data for household borrowing and lending, direct and indirect benefits and taxes to calibrate a “family” life cycle model at the core of which is the hypothesis that households face a borrowing interest rate that rises with the amount of non-collateral based borrowing. The household members jointly choose time paths of time use, consumption and saving over their life cycle in the face of this capital market imperfection. Importantly, households are shown to differ significantly in their saving behavior in a way that depends on secondary earner labor supply, with a strong positive association between saving and the income of the second earner. The results differ sharply from those of the existing literature.
    Review of Economics of the Household 01/2010; 8(3):297-323. · 0.64 Impact Factor
  • Source
    Patricia Apps
    02/2009;
  • Source
    Patricia Apps, Ngo Van Long, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: Given its significance in practice, the piecewise linear tax system seems to have received disproportionately little attention in the literature on optimal income taxation. This paper offers a simple and transparent analysis of its main characteristics.
    Journal of Public Economic Theory 02/2009; · 0.37 Impact Factor
  • Source
    Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: In a careful and thorough empirical study, Christopher Udry (1996) shows convincingly that, in a large sample of West African households, household resource allocations were not Pareto efficient. This paper argues that observation of the Pareto inefficiency of a household resource allocation does not however refute the hypothesis that it chooses this resource allocation as if it maximises some form of household welfare function possessing the Pareto property. To refute that hypothesis it is necessary to show that the observed allocation does not represent a second best optimum. For this it will be necessary to show that the estimated parameters of the model lie in a region of the parameter space for which the second best optimality of the allocation does not hold.
    02/2008;
  • Source
    Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: How are hourly wages affected by the Earned Income Tax Credit? Using variation in state EITC supplements, I find that a 10 percent increase in the generosity of the EITC is associated with a 5 percent fall in the wages of high school dropouts and a 2 percent fall in the wages of those with only a high school diploma, while having no effect on the wages of college graduates. Given the large increase in labor supply induced by the EITC, this is consistent with most reasonable estimates of the elasticity of labor demand. Although workers with children receive a much larger EITC than childless workers, and the effect of the credit on labor force participation is larger for those with children, the hourly wages of both groups are similarly affected by an EITC increase. As a check on this strategy, I also use federal variation in the EITC across gender-age-education groups, and find that those demographic groups that received the largest EITC increases also experienced a drop in their hourly wages, relative to other groups.
    Centre for Economic Policy Research, Research School of Economics, Australian National University, CEPR Discussion Papers. 01/2008;
  • Source
    Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper is a survey of the literature on theoretical models of the household, paying particular attention to some of the earlier contributions, and using them to place the current state of the theory in perspective. One of its aims is to suggest that the literature s neglect of Samuelson s proposal, that households can be modelled as if they maximised a form of social welfare function, was a mistake. However, the idea following directly from the Nash bargaining models, that the household s preference ordering over the utility profiles of its members depends on exogenous variables, in particular wage rates and non-wage incomes, is an important one. Combined with Samuelson s proposal, it can be made the basis for a general approach to modelling household decision taking, flexible enough to encompass non-cooperative behaviour and Pareto inefficiencies arising out of the inevitable incompleteness and unenforceability of domestic agreements. We also point out the importance of household production and some of the implications of its neglect in modelling households. Above all, the aim is to provide a deeper understanding of the current theoretical literature on household economics by means of a survey of its history.
    12/2007;
  • Source
    Patricia Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: We set out a general framework for cooperative household models, based on Samuelson’s idea of a household welfare function, but extending it to incorporate the key insight from Nash bargaining models - the idea that the household’s preference ordering over the utility profiles of its members depends on their wage rates (or prices more generally) and non-wage incomes. Applying reasonable general restrictions on the effects of changes in these variables allows derivation of the general implications of cooperative models.
    11/2007;
  • Source
    Patricia F. Apps, Ray Rees
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper is concerned with the question of how couples should be taxed. One reason for the importance of this issue is simply that the overwhelming majority of individuals live in households formed around couples, and so it could be argued that empirically, this is the single most important problem in personal income taxation. A second reason is that the economic theory of optimal taxation and tax reform, at least as it is presented in the mainstream literature, provides little guidance on this issue, resting as it does on models of the single person household. An old insight in the earlier public finance literature is that any discussion of the taxation of two-person households necessarily involves the recognition of the importance of household production. In this paper we try to show how a simple model of household production can be used to help the analysis of optimal taxation and tax reform, and to put the conventional wisdom, which says that it is optimal to tax women on a separate, lower tax schedule than men, on a firmer basis. What emerges clearly from the analysis is how centrally important the relationship between productivity in household production and female labour supply really is, and how little we know about it empirically.
    07/2007;
  • Source
    Patricia Apps, Ray Rees, Margi Wood
    [Show abstract] [Hide abstract]
    ABSTRACT: This paper argues against the policy position that begins with a doomsday scenario of publicly provided health insurance and pension systems threatened with collapse under the stresses imposed by population ageing, and instead contends that the threat of crisis in these systems is policy driven. The central thesis of the paper is that a range of policies lead to the creation of an ageing crisis by inhibiting the efficient reallocation of female labour from the home to the market in response to the decline in fertility. The analysis focuses on family support policies that create large effective tax burdens on female labour supply, by means testing the support on family income, or selectively on the second income. Examples include Family Tax Benefit Part A and Part B, the Medicare Levy and the Medicare Safety Net. The analysis draws on household survey data to show that female labour supply is strongly positively associated with household saving, the purchase of private health insurance and spending on family health generally. Policies that inhibit female labour supply therefore have the effect of reducing the tax base for funding public pensions and health care, while simultaneously reducing the capacity of families to fund them privately.
    Centre for Economic Policy Research, Research School of Economics, Australian National University, CEPR Discussion Papers. 01/2007;
  • Patricia Apps
    [Show abstract] [Hide abstract]
    ABSTRACT: The “new discrimination” refers to the use of government policy to increase the effective gender wage gap, measured in terms of the second earner’s net of tax income gain from working in the market place rather than at home. This paper presents an analysis of the tax treatment of family members and shows how the expansion of policy instruments, such as family tax benefits withdrawn on joint income and the low income tax offset, has raised average and marginal rates on the income of the second earner, typically the female partner. The study concludes that this new discrimination, together with limited access to affordable, high quality childcare, has severely limited the growth of female labour supply needed to fund family support, and is ultimately unsustainable in an ageing population.
    01/2007;

Publication Stats

974 Citations
18.93 Total Impact Points

Institutions

  • 1973–2013
    • University of Sydney
      Sydney, New South Wales, Australia
  • 2001
    • CUNY Graduate Center
      New York City, New York, United States
  • 1988
    • University of Guelph
      Guelph, Ontario, Canada
  • 1986
    • Center for Economic and Policy Research
      Washington, Washington, D.C., United States