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Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany

Discussion Papers 421, 26 S.

Viktor Steiner, Katharina Wrohlich

2004. Apr.

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Published in: CESifo Economic Studies 50 (2004), 3, 541-568


We analyze potential labor supply effects of a shift from the current German system of taxation of married couples to a system of limited real income splitting on the basis of econometric household labor supply model embedded in a tax-benefit model. Our simulation results show relatively small labor supply effects of a shift from the current system to one limited real income splitting system. In the benchmark scenario of a shift to separate taxation labor supply of wives would increase substantially in west Germany, while a significant number of husbands would drop out of the labor force.

Katharina Wrohlich

Head in the Gender Economics Department

JEL-Classification: H31;H24;J22
Frei zugängliche Version: (econstor)