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Intertemporal Labor Supply Effects of Tax Reforms

Listed author(s):
  • Peter Haan

In the year 2000, the German government passed the most ambitious tax reform in post-war German history aiming at a significant tax relief for households. One central aim of this tax reform was to improve work incentives and, thereby, foster employment. In this paper, I estimate an intertemporal discrete choice model of female labor supply that allows to analyze the behavioral effects of the tax reform on the labor supply of married and cohabiting women over time. Using the Markov chain property, I analyze the dynamics of labor supply behavior and derive the short- and long-run labor supply effects of the tax reform.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55798.de/dp669.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 669.

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Length: 24 p.
Date of creation: 2007
Handle: RePEc:diw:diwwpp:dp669
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  1. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  2. Stefan Homburg, 2000. "German Tax Reform 2000. Description and Appraisal," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 57(4), pages 504-513, August.
  3. Michaud, Pierre-Carl & Vermeulen, Frederic, 2004. "A Collective Retirement Model: Identification and Estimation in the Presence of Externalities," IZA Discussion Papers 1294, Institute for the Study of Labor (IZA).
  4. 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.
  5. Agell, J & Englund, P & Sodersten, J, 1996. "Tax reform of the Century - the Swedish Experiment," Papers 1996-13, Uppsala - Working Paper Series.
  6. Aaberge, Rolf & Dagsvik, John K & Strom, Steinar, 1995. " Labor Supply Responses and Welfare Effects of Tax Reforms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 635-659, December.
  7. Flood, Lennart & Hansen, Jörgen & Wahlberg, Roger, 2003. "Household Labour Supply and Welfare Participation in Sweden," CEPR Discussion Papers 3905, C.E.P.R. Discussion Papers.
  8. James J. Heckman, 1981. "Heterogeneity and State Dependence," NBER Chapters, in: Studies in Labor Markets, pages 91-140 National Bureau of Economic Research, Inc.
  9. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2005. "Top Incomes and Top Taxes in Germany," Discussion Papers of DIW Berlin 532, DIW Berlin, German Institute for Economic Research.
  10. Richard Blundell & Alan Duncan & Costas Meghir, 1995. "Estimating labour supply responses using tax reforms," IFS Working Papers W95/07, Institute for Fiscal Studies.
  11. Michaud, Pierre-Carl & Tatsiramos, Konstantinos, 2005. "Employment Dynamics of Married Women in Europe," IZA Discussion Papers 1706, Institute for the Study of Labor (IZA).
  12. Blundell, Richard & Ham, John & Meghir, Costas, 1987. "Unemployment and Female Labour Supply," Economic Journal, Royal Economic Society, vol. 97(388a), pages 44-64, Supplemen.
  13. Agell, Jonas & Persson, Mats & Sacklen, Hans, 2004. "The effects of tax reform on labor supply, tax revenue and welfare when tax avoidance matters," European Journal of Political Economy, Elsevier, vol. 20(4), pages 963-982, November.
  14. 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.
  15. Wagenhals Gerhard, 2000. "Arbeitsangebotseffekte des Steuer- und Transfersystems in der Bundesrepublik Deutschland / Labour Supply Effects of the Tax and Benefit System in the Federal Republic of Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 220(2), pages 191-213, April.
  16. 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.
  17. Victoria Prowse, 2005. "State Dependence in a Multi-state Model of Employment," Economics Papers 2005-W20, Economics Group, Nuffield College, University of Oxford.
  18. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  19. Christian Belzil, 2001. "Unemployment insurance and subsequent job duration: job matching versus unobserved heterogeneity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(5), pages 619-636.
  20. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
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