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The Impact of Income Taxation on the Ratio between
Reservation and Market Wages and the Incentives for Labour Supply
| Authors | Caliendo, M., Gambaro, L. and Haan, P. |
| Year | 2009 |
| Reference | Applied Economics Letters, 16(9), 877-883. |
| Keywords | Reservation/Market Wage Ratio, Income Taxation, Labour Supply, Microsimulation |
| JEL-Classification | J22, H24, H31 |
| Download | IZA Discussion Paper from February 2007:   PDF |
| Abstract | This paper 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 (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. |
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