Welfare and distribution effects of a general fixed allowance for social insurance contributions

Abstract

"The paper simulates the labor market impact of a fixed allowance for social insurance contributions. Based on a discrete choice labor supply model estimated using data from the German Socio-Economic Panel, we evaluate household utility changes triggered by the reform, including behavioral responses. Directly the reform raises individual welfare throughout. However, refinancing its substantial fiscal costs through a general consumption tax reduces aggregate labor supply and household utility levels, with progressive absolute losses. A poll tax preserves the immediate positive labor supply effect, but reverses entirely the benefits from the allowance except for households in the lowest income decile." (Author's abstract, IAB-Doku) ((en))

Cite article

Schneider, H. & Bonin, H. (2005): Wohlfahrts- und Verteilungseffekte eines allgemeinen Freibetrags bei den Sozialabgaben. In: Zeitschrift für ArbeitsmarktForschung, Vol. 38, No. 4, p. 475-492.