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Designing an Integrated Social Transfer System

Author

Listed:
  • Maximilian Joseph Blömer
  • Eike Johannes Eser
  • Lilly Fischer
  • Andreas Peichl

Abstract

The German transfer system – comprising citizen’s income, housing benefit, and additional child benefit – is complex, has high marginal tax rates and weak work incentives. Using the ifo microsimulation model, two reform paths are evaluated: a unified transfer system, and a pragmatic solution which merges only housing benefit and additional child benefit. Both simplify structures and strengthen work incentives, with the unified transfer system achieving the strongest results: an increase in labor supply of 149,000 full-time equivalents and fiscal savings of about EUR 4.5 billion. The partial integration also yields positive, though smaller, improvements.

Suggested Citation

  • Maximilian Joseph Blömer & Eike Johannes Eser & Lilly Fischer & Andreas Peichl, 2025. "Designing an Integrated Social Transfer System," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 159.
    • Handle: RePEc:ces:ifofob:159
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    File URL: https://www.ifo.de/DocDL/ifo_Forschungsbericht_159_Integriertes_Sozialtransfersystem.pdf
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    References listed on IDEAS

    as
    1. Seils, Eric, 2025. "Lohnt sich Arbeit in Deutschland noch?," WSI Policy Briefs 90, The Institute of Economic and Social Research (WSI), Hans Böckler Foundation.
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