Reforming Family Taxation in Germany - Labor Supply versus Insurance Effects

Hans Fehr (), Manuel Kallweit and Fabian Kindermann

FinanzArchiv: Public Finance Analysis, 2015, vol. 71, issue 1, 53-81

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 decide on labor supply and homework under income and life-span risk. We compute welfare changes across households and isolate aggregate efficiency effects of a move towards either individual taxation or family splitting. In terms of economic efficiency a switch towards individual taxation performs better than family taxation, due to reduced labor market distortions and improved insurance provision. The efficiency increases even further when individual taxation is combined with a child-splitting factor. Since such a reform also has very favorable distributional consequences, it should be seriously considered in the political debate.

Keywords: stochastic general equilibrium; home production; female labor supply; tax unit choice; insurance provision (search for similar items in EconPapers)
JEL-codes: H21 H24 J12 J22 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.mohrsiebeck.com/en/article/reforming-f ... 22115x14206439673170 (text/html)
Fulltext access is included for subscribers to the printed version.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mhr:finarc:urn:sici:0015-2218(201503)71:1_53:rftigl_2.0.tx_2-6

Ordering information: This journal article can be ordered from
Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany

DOI: 10.1628/001522108X14206439673170

Access Statistics for this article

FinanzArchiv: Public Finance Analysis is currently edited by Alfons Weichenrieder, Ronnie Schöb and Jean-François Tremblay

More articles in FinanzArchiv: Public Finance Analysis from Mohr Siebeck, Tübingen
Bibliographic data for series maintained by Thomas Wolpert ().