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Optimal Taxation: The Design of Child Related Cash- and In-Kind-Benefits

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  • Peter Haan
  • Katharina Wrohlich

Abstract

This paper contributes to the debate about the optimal design of tax-transfer systems. Based on the theory of optimal taxation, combined with microsimulation and microeconometric techniques we derive the welfare function which makes the current German tax and transfer system for single women optimal. Furthermore, we compare the welfare function conditional on the presence and age of children and asses how reforms of in-kind childcare transfers would affect the welfare function. This analysis allows us to derive conclusions about the optimal design of child related transfers and in-kind benefits.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.74833.de/diw_sp0065.pdf
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Bibliographic Info

Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 65.

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Length: 27 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp65

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Keywords: Optimal taxation; labor supply behavior; transfers for children;

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References

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  1. Rolf Aaberge & Ugo Colombino, 2006. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," Discussion Papers, Research Department of Statistics Norway 475, Research Department of Statistics Norway.
  2. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  3. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(3), pages 1039-1073, August.
  4. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  5. Feldstein, Martin, 1995. "Effect of Marginal Tax Rates on Taxable Income: A Panel Study of the 1986 Tax Reform Act," Scholarly Articles 2766676, Harvard University Department of Economics.
  6. Richard Blundell & Mike Brewer & Peter Haan & Andrew Shephard, 2009. "Optimal Income Taxation of Lone Mothers: An Empirical Comparison of the UK and Germany," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(535), pages F101-F121, 02.
  7. Katharina Wrohlich, 2005. "The Excess Demand for Subsidized Child Care in Germany," Discussion Papers of DIW Berlin 470, DIW Berlin, German Institute for Economic Research.
  8. Viktor Steiner & Katharina Wrohlich & Peter Haan & Johannes Geyer, 2008. "Documentation of the Tax-Benefit Microsimulation Model STSM: Version 2008," Data Documentation, DIW Berlin, German Institute for Economic Research 31, DIW Berlin, German Institute for Economic Research.
  9. Immervoll, Herwig & Barber, David, 2006. "Can Parents Afford to Work? Childcare Costs, Tax-Benefit Policies and Work Incentives," IZA Discussion Papers 1932, Institute for the Study of Labor (IZA).
  10. François Bourguignon & Amadéo Spadaro, 2008. "Tax-benefit revealed social preferences," PSE Working Papers, HAL halshs-00586292, HAL.
  11. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(516), pages 1-44, 01.
  12. Viktor Steiner & Katharina Wrohlich, 2008. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution, Work Incentives, and Household Welfare?," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 64(1), pages 115-142, March.
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