Suchergebnisse

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 have to decide on labor supply and homework facing income and lifespan risk. The numerical exercise computes the resulting welfare changes across households and isolates aggregate efficiency effects of a move towards either individual taxation or family splitting. Our results indicate strongly that a switch towards individual taxation performs best in terms of economic efficiency due to reduced labor market distortions and improved insurance provision. In our benchmark calibration the efficiency gain amounts to roughly 0.4 percent of aggregate resources. Excluding home production significantly reduces aggregate efficiency gains while including marital risk slightly improves the efficiency of individual taxation.

The present paper develops a general equilibrium model with overlapping generations and endogenous fertility in order to analyze the interaction between public policy and household labor supply and fertility decisions. The model's benchmark equilibrium reflects the current family policy consisting of joint taxation of married couples, monetary transfers and in-kind benefits which reduce the time cost of children. Then we simulate alternative reforms of the tax and the child benefit system and analyze the long-run impact on fertility and female labor supply. Our simulations indicate three central results: First, policies which simply increase the family budget either via higher transfers (direct or in-kind) or via family splitting increase fertility but reduce female employment. Second, increasing tax revenues due to the introduction of individual taxation would increase female employment but reduce fertility. Third, revenue neutral policies such as a reform of the benefit structure or a move towards individual taxation combined with an increase in in-kind benefits may achieve both goals and therefore yield significant welfare gains.

The state of the current German pension system is highly alarming. The aging society coupled with the prospect of increasing longevity is causing dramatic fiscal strains to the pay-as-you-go (PAYG) financed statutory pension scheme. In order to keep the current benefit level for future retirees, the contribution rate is projected to increase up to 30 percent during the next decades. However, already the current contribution level of 20 percent is considered to be too high. Therefore, the government enacted the 1992 Pension Reform Act and just recently presented a draft for a new Pension Reform Bill in order to restrain the expenditure growth. Both reforms intend to lower the pension level gradually and to finance a higher proportion of expenditures in the future by federal taxes. These measures, however, only improve the financial situation of the public pension system in the short and medium-run. The long-run fiscal burdens inherent in the system either require a substantial increase in the contribution rate or a dramatic reduction in the future benefit level. Since the necessary adjustments are almost unfeasible politically, the current unfunded pension scheme is seen at the 'verge of collapse' and unsustainable for the future. It is therefore not surprising that in Germany, like in many other countries, a growing number of economists are discussing the move to a fully funded pension system. In essence this means that public pensions will be substituted by private retirement provisions in the future. This paper, therefore, refers to the shift to a fully funded system as "privatization" of public pensions.