Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/18323 
Year of Publication: 
2005
Series/Report no.: 
DIW Discussion Papers No. 472
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
In the year 2000, the German government passed the most ambitious tax reform in postwar German history aiming at a significant tax relief for households. An important aim of this tax reform was to improve work incentives and, thereby, foster employment. Drawing on data of the German Socio Economic Panel (SOEP), we analyze the work incentive and employment effects of this reform on the basis of a behavioral microsimulation model. We find that the significant reduction of marginal tax rates implied by the tax reform results in a substantial increase in labor supply, a slight reduction of market wages and an increase in employment of about 130 thousand people (full-time equivalents).
Subjects: 
tax reform
behavioral effects
labor market effects
JEL: 
J22
H31
H24
Document Type: 
Working Paper

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