Why are Mothers Working Longer Hours in Austria than in Germany? A Comparative Micro Simulation Analysis

30 Pages Posted: 6 Jul 2007

See all articles by Helene Dearing

Helene Dearing

Institute for Advanced Studies (IHS)

Helmut Hofer

Institute for Advanced Studies (IHS), Vienna

Christine Lietz

University of Cambridge

Rudolf Winter-Ebmer

Johannes Kepler University Linz - Department of Economics; Institute for Advanced Studies (IHS) - Department of Economics & Finance; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research

Date Written: June 2007

Abstract

Labor force participation rates of mothers in Austria and Germany are similar, however full-time employment rates are much higher among Austrian mothers. In order to find out to what extent these differences can be attributed to differences in the tax transfer-system, we perform a comparative micro simulation exercise. After estimating structural labor supply models of both countries, we interchange two important institutional characteristics of the two countries, namely (i) the definition of the tax unit within the personal income tax and (ii) the parental leave benefit scheme. As our analysis shows, differences in mothers' employment patterns can partly be explained by the different tax systems: While Germany has a system of joint taxation with income splitting for married couples, Austria taxes everyone individually, which leads to lower marginal tax rates for secondary earners than the German system.

Keywords: labor supply, micro simulation, family policy, income taxation, Austria, Germany

JEL Classification: J22, H31, H24

Suggested Citation

Dearing, Helene and Hofer, Helmut and Lietz, Christine and Winter-Ebmer, Rudolf and Wrohlich, Katharina, Why are Mothers Working Longer Hours in Austria than in Germany? A Comparative Micro Simulation Analysis (June 2007). IZA Discussion Paper No. 2845. Available at SSRN: https://ssrn.com/abstract=998240

Helene Dearing

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
1080 Vienna
Austria

Helmut Hofer

Institute for Advanced Studies (IHS), Vienna ( email )

Josefstädter Straße 39
1080 Vienna
Austria

Christine Lietz

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Rudolf Winter-Ebmer (Contact Author)

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8236 (Phone)
+43 732 2468 8238 (Fax)

HOME PAGE: http://www.econ.jku.at/winter

Institute for Advanced Studies (IHS) - Department of Economics & Finance ( email )

Stumpergasse 56
A-1060 Vienna, A-1060
Austria

HOME PAGE: http://www.ihs.ac.at

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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