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Optimal Taxation: The Design of Child Related Cash- and In-Kind-Benefits

  • Haan, Peter


    (DIW Berlin)

  • Wrohlich, Katharina


    (DIW Berlin)

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 asses 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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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3128.

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Length: 30 pages
Date of creation: Oct 2007
Date of revision:
Publication status: published in: German Economic Review, 2010, 11(3), 278-301
Handle: RePEc:iza:izadps:dp3128
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  1. 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, vol. 64(1), pages 115-142, March.
  2. 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.
  3. Rolf Aaberge & Ugo Colombino, 2006. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," ICER Working Papers 37-2006, ICER - International Centre for Economic Research.
  4. Immervoll, Herwig & Barber, David, 2006. "Can Parents Afford to Work? Childcare Costs, Tax-Benefit Policies and Work Incentives," IZA Discussion Papers 1932, Institute for the Study of Labor (IZA).
  5. François Bourguignon & Amadéo Spadaro, 2008. "Tax-benefit revealed social preferences," PSE Working Papers halshs-00586292, HAL.
  6. Katharina Wrohlich, 2008. "The excess demand for subsidized child care in Germany," Applied Economics, Taylor & Francis Journals, vol. 40(10), pages 1217-1228.
  7. 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.
  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. repec:oup:qjecon:v:117:y:2002:i:3:p:1039-1073 is not listed on IDEAS
  10. 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.
  11. 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, vol. 119(535), pages F101-F121, 02.
  12. 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.
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