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Distributional and Welfare Effects of Germany's Year 2000 Tax Reform

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  • Ochmann, Richard

Abstract

This paper empirically investigates distributional and welfare effects of Germany's year 2000 tax reform. The reform is simulated in an ex-ante behavioral microsimulation approach. Dead weight loss of capital income taxation is estimated in a structural model for household savings and asset demand applied to German survey data. Significant reductions in tax rates result in income gains, especially in higher tax brackets, whereby income inequality increases, in particular in East-Germany. Moreover, households increase savings and alter the structure of asset demand due to shifts in relative asset prices. As a result, utility losses reduce welfare effects for almost all households.

Suggested Citation

  • Ochmann, Richard, 2011. "Distributional and Welfare Effects of Germany's Year 2000 Tax Reform," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48686, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc11:48686
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    References listed on IDEAS

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    Cited by:

    1. Richard Ochmann, 2016. "Distributional and welfare effects of Germany’s year 2000 tax reform: the context of savings and portfolio choice," Empirical Economics, Springer, vol. 51(1), pages 93-123, August.

    More about this item

    Keywords

    Capital income taxation; household savings; asset demand; welfare effects;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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