Tax incentives and family labor supply in Austria

Hanappi, Tibor and Müllbacher, Sandra (2016) Tax incentives and family labor supply in Austria. Review of Economics of the Household, 14 (4), pp. 961-987.

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The family policy reform 2009 introduced tax deductibles for children and child care expenditures in Austria. In this paper we evaluate this reform based on a structural labor supply model with unitary households which has been estimated on the European Statistics on Income and Living Conditions cross-sections 2004–2008. We find that the reform had only small employment effects, most of them being generated through the introduction of a child care deductible. However, to illustrate the employment potential of a shift from universal child transfers to tax deductibles we propose additional simulations showing that such a policy shift would yield an increase in full time equivalents of approximately .70 % of overall employment, with married females increasing their labor supply by up to 1.5 %. While the proposed policy shifts have regressive effects in terms of their distributional impact, we show that phasing-out the tax deductible at higher income allows for the compensation of lower-income households without jeopardizing positive employment effects.

Item Type: Article in Academic Journal
Keywords: Labor supply, Discrete choice, Income taxation, Family policy
Classification Codes (e.g. JEL): H24 H31 J13 J21 J22
Date Deposited: 22 May 2015 07:28
Last Modified: 08 Jun 2017 12:28
DOI: 10.1007/s11150-013-9230-9
ISSN: 1569-5239

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