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Why Are Mothers Working Longer Hours in Austria than in Germany? A Comparative Microsimulation Analysis

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  • Helene Dearing
  • Helmut Hofer
  • Christine Lietz
  • Rudolf Winter-Ebmer
  • Katharina Wrohlich

Abstract

Labour force participation rates of mothers in Austria and Germany are similar; however, full-time employment rates are much higher among Austrian mothers. In order to find out to what extent these differences can be attributed to differences in the tax-transfer system, we perform a comparative microsimulation exercise. After estimating structural labour supply models for both countries, we interchange two important institutional characteristics of the two countries - namely, (i) the definition of the tax unit within the personal income tax and (ii) the parental leave benefit scheme. As our analysis shows, differences in mothers'employment patterns can partly be explained by the different tax systems: while Germany has a system of joint taxation with income splitting for married couples, Austria taxes everyone individually, which leads to lower marginal tax rates for secondary earners than in the German system. Copyright 2007 Institute for Fiscal Studies.

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Bibliographic Info

Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.

Volume (Year): 28 (2007)
Issue (Month): 4 (December)
Pages: 463-495

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Handle: RePEc:ifs:fistud:v:28:y:2007:i:4:p:463-495

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  1. Viktor Steiner & Katharina Wrohlich, 2006. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution and Work Incentives," Discussion Papers of DIW Berlin 612, DIW Berlin, German Institute for Economic Research.
  2. Katharina Wrohlich, 2008. "The excess demand for subsidized child care in Germany," Applied Economics, Taylor & Francis Journals, vol. 40(10), pages 1217-1228.
  3. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  4. Viktor Steiner & Katharina Wrohlich, 2004. "Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany," Discussion Papers of DIW Berlin 421, DIW Berlin, German Institute for Economic Research.
  5. Peter Haan, 2006. "Much ado about nothing: conditional logit vs. random coefficient models for estimating labour supply elasticities," Applied Economics Letters, Taylor & Francis Journals, vol. 13(4), pages 251-256.
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