Tax incentives and family labor supply in Austria |
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Authors: | Tibor Paul Hanappi Sandra Müllbacher |
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Institution: | 1.University of Linz,Linz,Austria;2.Institute for Advanced Studies,IHS Vienna ,Vienna,Austria |
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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. |
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