Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/66216 
Year of Publication: 
2012
Series/Report no.: 
Diskussionsbeiträge No. 2012/20
Publisher: 
Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft, Berlin
Abstract: 
Generous income support programs as provided by European welfare states have often been blamed to reduce work incentives for lower income classes and to increase durations of unemployment. Standard studies measure work incentives based on annual income concepts. This paper analyzes how work incentives inherent in the German tax-benefit system evolve when extending the time horizon to three years (long-term). Participation tax rates are computed for 3-year periods 1995-1997 and 2005-2007 to reveal potential effects of the labor market reforms between 2003 and 2005. Results show that long-term work incentives increased even more than short-term work incentives. Particularly for middle-income individuals, this is largely explained by the abolition of earnings-related unemployment assistance.
Subjects: 
welfare
work incentives
unemployment
unemployment insurance
JEL: 
H31
J65
Document Type: 
Working Paper

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