Abstract (Translated):
The paper simulates the labor market impact of a fixed allowance for social insurance contributions. Based on a discrete choice labor supply model estimated using data from the German Socio-Economic Panel, we evaluate household utility changes triggered by the reform, including behavioral responses. Directly the reform raises individual welfare throughout. However, refinancing its substantial fiscal costs through a general consumption tax reduces aggregate labor supply and household utility levels, with progressive absolute losses. A poll tax preserves the immediate positive labor supply effect, but reverses entirely the benefits from the allowance except for households in the lowest income decile.