The Impact of Income Taxation on the Ratio between Reservation and Market Wages and the Incentives for Labour Supply
AbstractThis paper extends previous research about the determinants of reservation wages by analysing the effect of progressive income taxation on the ratio between reservation and net market wages. Based on micro data for Germany (SOEP) we show that joint income taxation in Germany which discriminates by marital status, has a strong and highly significant impact on the reservation/market wage ratio. Relative to single filers, this leads to strong negative labour supply incentives for secondary earners and to positive incentives for first earners in married couples.
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Bibliographic InfoPaper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 670.
Length: 15 p.
Date of creation: 2007
Date of revision:
Publication status: Published in: Applied Economic Letters 16 (2008) Iss.9, 877-883
Reservation/market wage ratio; income taxation; labour supply; microsimulation;
Other versions of this item:
- Marco Caliendo & Ludovica Gambaro & Peter Haan, 2009. "The impact of income taxation on the ratio between reservation and market wages and the incentives for labour supply," Applied Economics Letters, Taylor & Francis Journals, vol. 16(9), pages 877-883.
- Caliendo, Marco & Gambaro, Ludovica & Haan, Peter, 2007. "The Impact of Income Taxation on the Ratio between Reservation and Market Wages and the Incentives for Labour Supply," IZA Discussion Papers 2599, Institute for the Study of Labor (IZA).
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-10 (All new papers)
- NEP-LAB-2007-03-10 (Labour Economics)
- NEP-PBE-2007-03-10 (Public Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Eckstein, Zvi & van den Berg, Gerard J, 2004.
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CEPR Discussion Papers
4199, C.E.P.R. Discussion Papers.
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- Prasad, Eswar, 2003. "What Determines the Reservation Wages of Unemployed Workers? New Evidence from German Micro Data," IZA Discussion Papers 694, Institute for the Study of Labor (IZA).
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