Universal, targeted or both: Effects of different child support policies on labour supply and poverty - A simulation study

Kerstin Bruckmeier, Diego d'Andria and Jürgen Wiemers
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Kerstin Bruckmeier: Institute for Employment Research (IAB), Nuremberg, Germany
Jürgen Wiemers: Institute for Employment Research (IAB), Nuremberg, Germany

No 202206, IAB-Discussion Paper from Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]

Abstract: "We study a set of hypothetical reforms of child benefits in Germany, using a static tax-benefit microsimulation model augmented with endogenous labour supply and take-up choices (IAB-MSM). We distinguish between a reform of the universal non-means-tested child benefit, a reform of the mean-tested child benefit under the minimum income scheme, and a combination of both. Since the reforms are associated with different fiscal costs, we consider two different budget closures: an increase in the income tax or a consumption tax. The model simulates the impacts of the reforms on household income, poverty and labour supply. We find that improvements in the means-tested child benefit are well-targeted: They provide a high level of poverty reduction with a low fiscal impact at the cost of reduced labour supply incentives for low-income families. When unconditional benefits are increased, the effect on overall income inequality is more pronounced at the cost of reduced labour supply incentives for middle- and high-income families. Finally, when combined, the two approaches show synergies, particularly in the form of improved poverty reduction." (Author's abstract, IAB-Doku) ((en))

Keywords: Bundesrepublik Deutschland; Armut; IAB-Open-Access-Publikation; Auswirkungen; Einkommensteuer; Einkommensverteilung; Eltern; Familienpolitik; Finanzierung; Grundsicherung nach SGB II; Jugendliche; Kinder; Kindergeld; Leistungshöhe; öffentliche Ausgaben; Reformpolitik; soziale Ungleichheit; Arbeitskräfteangebot; Umsatzsteuer; Kindergrundsicherung; 2021-2021 (search for similar items in EconPapers)
JEL-codes: C15 D31 H53 I38 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2022-04-25
New Economics Papers: this item is included in nep-lma
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https://doi.org/10.48720/IAB.DP.2206

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Persistent link: https://EconPapers.repec.org/RePEc:iab:iabdpa:202206

DOI: 10.48720/IAB.DP.2206

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