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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 assess 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.74205.de/dp737.pdf
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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 737.

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Length: 27 p.
Date of creation: 2007
Date of revision:
Handle: RePEc:diw:diwwpp:dp737

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

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  1. 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.
  2. Katharina Wrohlich, 2008. "The excess demand for subsidized child care in Germany," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 40(10), pages 1217-1228.
  3. Rolf Aaberge & Ugo Colombino, 2008. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," ICER Working Papers, ICER - International Centre for Economic Research 19-2008, ICER - International Centre for Economic Research.
  4. Immervoll, Herwig & Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare Reform in European Countries: A Micro-Simulation Analysis," CEPR Discussion Papers 4324, C.E.P.R. Discussion Papers.
  5. 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.
  6. François Bourguignon & Amedeo Spadaro, 2012. "Tax–benefit revealed social preferences," Journal of Economic Inequality, Springer, vol. 10(1), pages 75-108, March.
  7. 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.
  8. Viktor Steiner & Katharina Wrohlich & Peter Haan & Johannes Geyer, 2008. "Documentation of the Tax-Benefit Microsimulation Model STSM: Version 2008," Data Documentation 31, DIW Berlin, German Institute for Economic Research.
  9. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
  10. 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.
  11. Herwig Immervoll & David Barber, 2005. "Can Parents Afford to Work?: Childcare Costs, Tax-Benefit Policies and Work Incentives," OECD Social, Employment and Migration Working Papers 31, OECD Publishing.
  12. 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, vol. 21(1), pages 75-103, March.
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