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Why Are Mothers Working Longer Hours in Austria than in Germany?: A Comparative Micro Simulation Analysis

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

Abstract

Labor 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 transfersystem, we perform a comparative micro simulation exercise. After estimating structural labor supply models of 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 the German system.

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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 695.

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Length: 27 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp695

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Keywords: Labor supply; micro simulation; family policy; income taxation; Austria; Germany;

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  1. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  2. 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.
  3. Steiner, Viktor & Wrohlich, Katharina, 2006. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution and Work Incentives?," IZA Discussion Papers 2245, Institute for the Study of Labor (IZA).
  4. 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.
  5. 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.
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