Long-term participation tax rates
Abstract
Generous income support programs as provided by European welfare states have often been blamed to reduce work incentives for lower income classes and to increase durations of unemployment. Standard studies measure work incentives based on annual income concepts. This paper analyzes how work incentives inherent in the German tax-benefit system evolve when extending the time horizon to three years (long-term). Participation tax rates are computed for 3-year periods 1995-1997 and 2005-2007 to reveal potential effects of the labor market reforms between 2003 and 2005. Results show that long-term work incentives increased even more than short-term work incentives. Particularly for middle-income individuals, this is largely explained by the abolition of earnings-related unemployment assistance. --Download Info
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Paper provided by Free University Berlin, School of Business & Economics in its series Discussion Papers with number 2012/20.Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:zbw:fubsbe:201220
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Related research
Keywords: welfare; work incentives; unemployment; unemployment insurance;Find related papers by JEL classification:
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ACC-2012-12-06 (Accounting & Auditing)
- NEP-ALL-2012-12-06 (All new papers)
- NEP-EUR-2012-12-06 (Microeconomic European Issues)
- NEP-IAS-2012-12-06 (Insurance Economics)
- NEP-LAB-2012-12-06 (Labour Economics)
- NEP-PBE-2012-12-06 (Public Economics)
- NEP-PUB-2012-12-06 (Public Finance)
References
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