We analyze potential labor supply effects of a shift from the current German system of taxation of married couples to a system of limited real income splitting on the basis of econometric household labor supply model embedded in a tax-benefit model. Our simulation results show relatively small labor supply effects of a shift from the current system to one limited real income splitting system. In the benchmark scenario of a shift to separate taxation labor supply of wives would increase substantially in west Germany, while a significant number of husbands would drop out of the labor force.
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number
421.
Length: 26 p. Date of creation: 2004 Date of revision: Publication status: Published in: CESifo Economic Studies 50 (2004), 3, 541-568 Handle: RePEc:diw:diwwpp:dp421
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Find related papers by JEL classification: H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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