Tax incentives and family labor supply in Austria

Tibor Hanappi and Sandra Müllbacher
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Sandra Müllbacher: IHS Vienna

Review of Economics of the Household, 2016, vol. 14, issue 4, No 9, 987 pages

Abstract: Abstract 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.

Keywords: Labor supply; Discrete choice; Income taxation; Family policy; H24; H31; J13; J21; J22 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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Working Paper: Tax Incentives and Family Labor Supply in Austria (2012)
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DOI: 10.1007/s11150-013-9230-9

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