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Why are Mothers Working Longer Hours in Austria than in Germany? A Comparative Micro Simulation Analysis

Author

Listed:
  • Dearing, Helene

    (Institute for Advanced Studies (IHS), Vienna, Austria)

  • Hofer, Helmut

    (Institute for Advanced Studies (IHS), Vienna, Austria)

  • Lietz, Christine

    (Institute for Advanced Studies (IHS), Vienna, Austria)

  • Winter-Ebmer, Rudolf

    (Department of Economics, University of Linz, Linz, Austria)

  • Wrohlich, Katharina

    (German Institute for Economic Research (DIW), Berlin, Germany)

Abstract

Labor force participation rates of mothers in Austria and Germany are similar, however full-time employment rates are much higher among Austrian mothers. In order to find out to what extent these differences can be attributed to differences in the tax transfer-system, we perform a comparative micro simulation exercise. After estimating structural labor supply models of both countries, we interchange two important institutional characteristics of the two countries, namely (i) the definition of the tax unit within the personal income tax and (ii) the parental leave benefit scheme. As our analysis shows, differences in mothers’ employment patterns can partly be explained by the different tax systems: While Germany has a system of joint taxation with income splitting for married couples, Austria taxes everyone individually, which leads to lower marginal tax rates for secondary earners than the German system.

Suggested Citation

  • Dearing, Helene & Hofer, Helmut & Lietz, Christine & Winter-Ebmer, Rudolf & Wrohlich, Katharina, 2007. "Why are Mothers Working Longer Hours in Austria than in Germany? A Comparative Micro Simulation Analysis," Economics Series 213, Institute for Advanced Studies.
    • Handle: RePEc:ihs:ihsesp:213
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    File URL: https://irihs.ihs.ac.at/id/eprint/1777
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    References listed on IDEAS

    as
    1. Katharina Wrohlich, 2008. "The excess demand for subsidized child care in Germany," Applied Economics, Taylor & Francis Journals, vol. 40(10), pages 1217-1228.
    2. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    3. Viktor Steiner & Katharina Wrohlich, 2006. "Introducing Family Tax Splitting in Germany: How Would It Affect the Income Distribution and Work Incentives," Discussion Papers of DIW Berlin 612, DIW Berlin, German Institute for Economic Research.
    4. Peter Haan, 2006. "Much ado about nothing: conditional logit vs. random coefficient models for estimating labour supply elasticities," Applied Economics Letters, Taylor & Francis Journals, vol. 13(4), pages 251-256.
    5. Viktor Steiner & Katharina Wrohlich, 2004. "Household Taxation, Income Splitting and Labor Supply Incentives – A Microsimulation Study for Germany," CESifo Economic Studies, CESifo Group, vol. 50(3), pages 541-568.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Labor supply; micro simulation; family policy; income taxation; Austria; Germany;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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