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Why Are Mothers Working Longer Hours in Austria than in Germany? A Comparative Microsimulation Analysis

Author

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

Abstract

Labour 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-transfer system, we perform a comparative microsimulation exercise. After estimating structural labour supply models for 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 in the German system. Copyright 2007 Institute for Fiscal Studies.

Suggested Citation

  • Helene Dearing & Helmut Hofer & Christine Lietz & Rudolf Winter-Ebmer & Katharina Wrohlich, 2007. "Why Are Mothers Working Longer Hours in Austria than in Germany? A Comparative Microsimulation Analysis," Fiscal Studies, Institute for Fiscal Studies, vol. 28(4), pages 463-495, December.
    • Handle: RePEc:ifs:fistud:v:28:y:2007:i:4:p:463-495
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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • 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

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