Arbeitspapier
The impact of short- and long-term participation tax rates on labor supply
Generous income support programs as provided by European welfare states have often been blamed to hamper employment. This paper investigates the importance of incentives inherent in the tax-benefit system for the individual decision to take up work. Using German microdata over the period 1993 - 2010 we find that recent reforms in Germany increased work incentives at the extensive margin measured by the Participation Tax Rate (PTR), particularly for low income individuals. Work incentives are even higher if the time horizon is extended to more than one year, pointing at an overestimation of the disincentives by standard measures. Regression analysis reveals that a decrease in the PTR increases the likelihood of taking up work significantly.
- Language
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Englisch
- Bibliographic citation
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Series: SOEPpapers on Multidisciplinary Panel Data Research ; No. 777
- Classification
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Wirtschaft
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Fiscal Policies and Behavior of Economic Agents: Household
Time Allocation and Labor Supply
Unemployment Insurance; Severance Pay; Plant Closings
- Subject
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labor force participation
work incentives
welfare
unemployment insurance
income taxation
- Event
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Geistige Schöpfung
- (who)
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Bartels, Charlotte
Pestel, Nico
- Event
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Veröffentlichung
- (who)
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Deutsches Institut für Wirtschaftsforschung (DIW)
- (where)
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Berlin
- (when)
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2015
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Bartels, Charlotte
- Pestel, Nico
- Deutsches Institut für Wirtschaftsforschung (DIW)
Time of origin
- 2015
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