Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90169
Authors: 
Fehr, Hans
Kallweit, Manuel
Kindermann, Fabian
Year of Publication: 
2013
Series/Report no.: 
SOEPpapers on Multidisciplinary Panel Data Research 613
Abstract: 
The present paper quantifies the economic consequences of eliminating the system of income splitting in Germany. We apply a dynamic simulation model with overlapping generations where single and married agents have to decide on labor supply and homework facing income and lifespan risk. The numerical exercise computes the resulting welfare changes across households and isolates aggregate efficiency effects of a move towards either individual taxation or family splitting. Our results indicate strongly that a switch towards individual taxation performs best in terms of economic efficiency due to reduced labor market distortions and improved insurance provision. In our benchmark calibration the efficiency gain amounts to roughly 0.4 percent of aggregate resources. Excluding home production significantly reduces aggregate efficiency gains while including marital risk slightly improves the efficiency of individual taxation.
Subjects: 
stochastic general equilibrium
home production
female labor supply
tax unit choice
insurance provision
JEL: 
H21
H24
J12
J22
Document Type: 
Working Paper

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