Lifetime earnings inequality in Germany
Collaborators: Giacomo Corneo and Holger Lüthen
Investigation of the magnitude, pattern, and evolution of lifetime earnings inequality in Germany. Based on a large sample of earnings biographies from social security records. We show that the intra-generational distribution of lifetime earnings of male workers has a Gini coefficient around .2 for cohorts born in the late 1930s and early 1940s; this amounts to about 2/3 of the value of the Gini coefficient of annual earnings. Within cohorts, mobility in the distribution of yearly earnings is substantial at the beginning of the lifecycle, decreases afterwards and virtually vanishes after age forty. Earnings data for thirty-one cohorts reveals striking evidence of a secular rise of intra-generational inequality in lifetime earnings. Discussion Paper
Fiscal equalization and regions' (un)willingness-to-tax: Evidence from Germany
Collaborators: Beate Jochimsen and Carsten Schröder
We address the question as to which extent local jurisdictions in a federation under-exploit the tax base due to their high marginal rate of loss, i.e. the low participation in tax revenues, governed by the federation. By means of a stylized model we investigate if local authorities in such a federation have incentives to align the effective tax rates of their residents to rates of tax back on regional tax revenues. We empirically test the model using administrative income-tax micro data from Germany and two setups: a heckman selection model and a natural experiment design. Both approaches provide evidence in support of our theoretical model. Discussion Paper
Horizontal Equity in the U.S. Tax and Transfer System
Collaborators: Sebastian Eichfelder and Stephen Utz
We analyze the distributive justice of the combined burden of income taxes, social security taxes and public transfers on employee households in the United States on the federal level and in six member states. To investigate whether the treatment of families by the aggregate tax and transfer system can be regarded as “fair”, we compare the equivalent incomes of eight different household types. Using the concepts of horizontal equity and system-inherent equivalence scales, we find evidence for a privileged treatment of families with children and a low market income due to the earned income tax credit (EIC), the child tax credit and the supplemental nutrition assistance program (SNAP). Discussion Paper
The Dynamics of Earnings in Germany: Evidence from Social Security Records
Collaborators: Matthias Giesecke and Holger Lüthen
We examine patterns of earnings volatility for male employees who are subject to statutory social security contributions in West Germany over the period 1960 - 2009. For this purpose, we analyse individual records covering highly reliable earnings biographies provided by the German Social Security Administration. We decompose earnings into permanent and transitory components and estimate parameters of the underlying variance-covariance structure of the earnings components model. This provides insights into the mechanics of earnings dynamics of the German labour market.
The reaction of charitable giving to changes in persistent and transitory tax incentives
Collaborator: Clive Werdt
We estimate the elasticity of charitable giving with respect to price and income changes using a rich panel of German income tax returns covering the period 2001 to 2006. Employing censored quantile regression and exploiting the panel structure the advantage of our analysis is twofold: First, we derive results for different points in the underlying distribution of charitable giving and allow for heterogeneity in giving. Thus, we do not only know if giving responds to price and income but where the incentives matter most. Second, we disentangle long-run responses to persistent changes in price and income from short-run timing, consumption smoothing, or tax planning.
The effect of public sector employment on wage distribution compression
Collaborator: Miriam Reuschel
The tasks of the public sector as an employer in a welfare state are twofold. First, the public sector has to provide services which are regarded as indispensable for society. Here, the public sector competes for qualified staff with the private sector. In order to attract qualified personnel the public sector competes with a package, often comprised off lower remuneration accompanied by higher job security. Second, public sector employment may be used as means to support disadvantaged groups on the labor market. Especially woman and unqualified workers tend to get higher remuneration compared to an employment in the private sector. Consequently, a public-private wage gap exists and public sector employment tends to compress the overall wage distribution. In our study we investigate the evolution of public-private wage gap and the equalizing role of public employment over the period 1984 to 2010.