Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/112789
Authors: 
Bartels, Charlotte
Pestel, Nico
Year of Publication: 
2015
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 777
Abstract: 
Generous income support programs as provided by European welfare states have often been blamed to hamper employment. This paper investigates the importance of incentives inherent in the tax-benefit system for the individual decision to take up work. Using German microdata over the period 1993 - 2010 we find that recent reforms in Germany increased work incentives at the extensive margin measured by the Participation Tax Rate (PTR), particularly for low income individuals. Work incentives are even higher if the time horizon is extended to more than one year, pointing at an overestimation of the disincentives by standard measures. Regression analysis reveals that a decrease in the PTR increases the likelihood of taking up work significantly.
Subjects: 
labor force participation
work incentives
welfare
unemployment insurance
income taxation
JEL: 
H24
H31
J22
J65
Document Type: 
Working Paper

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