The impact of income taxation on the ratio between reservation and market wages and the incentives for labour supply

Marco Caliendo, Ludovica Gambaro and Peter Haan

Applied Economics Letters, 2009, vol. 16, issue 9, 877-883

Abstract: This article extends previous research about the determinants of reservation wages by analysing the effect of progressive income taxation on the ratio between reservation and net market wages. Based on micro data for Germany Socio-Economic-Panel (SOEP) we show that joint income taxation in Germany which discriminates by marital status, has a strong and highly significant impact on the reservation/market wage ratio. Relative to single filers, this leads to strong negative labour supply incentives for secondary earners and to positive incentives for first earners in married couples.

Date: 2009
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Related works:
Working Paper: The Impact of Income Taxation on the Ratio between Reservation and Market Wages and the Incentives for Labour Supply (2007)
Working Paper: The Impact of Income Taxation on the Ratio between Reservation and Market Wages and the Incentives for Labour Supply (2007)
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DOI: 10.1080/13504850701222103

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