Does the Representation of Household Behavior Matter for Welfare Analysis of Tax-benefit Policies? An Introduction

A widely shared intuition holds that individual control over money matters for the decision process within the household and the subsequent distribution of resources and welfare. As a consequence, there are good reasons to depart from the unitary model of the household and to explore the possibilities offered by models of the family accounting for several decision makers in the household and for the potential impact of tax reforms on the balance of power. This paper summarizes both the methodological and empirical findings presented in the next three papers of this special issue of the Review of the Economics of the Household. This series of contributions primarily entails a concrete comparison of the policy implications of the choice between the unitary and a particular multi-person representation: the collective representation. On the one hand, it suggests a methodology to implement the collective model of labor supply in a realistic context where participation is modeled together with working hours, and where the full tax-benefit system is accounted for. On the other hand, the empirical part relies on comprehensive simulations of tax reforms in Belgium, France, Germany, Italy, Spain, and the United Kingdom, and allows to quantify the distortions that may affect policy recommendations based on the unitary model.

CREDIT CONSTRAINTS AND THE CYCLICALITY OF R&D INVESTMENT: EVIDENCE FROM FRANCE

We use a French firm‐level data set containing 13,000 firms over the period 1994–2004 to analyze the relationship between credit constraints and firms’ R&D behavior over the business cycle. Our main results can be summarized as follows: (i) R&D investment is countercyclical without credit constraints, but it becomes procyclical as firms face tighter credit constraints; (ii) this result is only observed for firms in sectors that depend more heavily upon external finance, or that are characterized by a low degree of asset tangibility; (iii) in more credit‐constrained firms, R&D investment plummets during recessions but does not increase proportionally during upturns.