Labour supply in Austria: an assessment of recent developments and the effects of a tax reform

Abstract

We apply a structural discrete choice framework to estimate incomespecific own-wage and cross-wage labour supply elasticities in regard to working hours and participation for married and single males and females in Austria. We use data from the Austrian components of the European Statistics of Income and Living Conditions from 2004 to 2012. Own-wage elasticities are very small for males and slightly higher for females. Cross-wage elasticities are practically zero for males and slightly negative for females. Male and female own-wage elasticities decrease with higher incomes. Over time female labour supply elasticities decrease. Furthermore, we assess the labour supply and fiscal effects of the Austrian tax reform of 2016. We find a total increase in working hours by 0.71%. The labour supply effects are stronger on the intensive margin, for females and for low-income earners. On total the tax reform induces a tax relief of 4.7 billion Euros. The positive effects on tax burden and disposable income increase with the individual income.

Reducing the income tax burden for households with children: an assessment of the child tax credit reform in Austria

“…An increase of 1 per cent in gross income corresponds to an increase in working hours of males and females by 0.285 per cent and 0.334 per cent, respectively. These results are in line with other findings for Austria by, for example, Hanappi and Müllbacher (2016), Müllbacher and Nagl (2017) and Bargain et al. (2014), who all report higher labour supply elasticities for women than men.…”

“…In general, the labour supply elasticities are in line with the findings of Bargain et al. (2014) and Hanappi and Müllbacher (2016) for Austria, and are slightly higher than the results derived by Müllbacher and Nagl (2017). This might be driven by the use of different data sets to derive the elasticities.…”

“…In absolute values, this would reflect an increase of 10,967 in full‐time equivalents: 5,827 females and 5,140 males. Compared with the tax reform of 2016, which was in magnitude substantially more costly, this effect is very similar in size to the one estimated by Müllbacher and Nagl (2017). They estimated a total labour supply increase related to the tax reform in 2016 in full‐time equivalents of 12,675, with an increase of about 7,533 females and 5,142 males.…”

“…This led to the introduction of several tax credits and allowances for certain groups of taxpayers within the tax system. For a detailed overview of the structure of the current Austrian tax system and the latest structural tax reform in 2016, see, for example, Müllbacher and Nagl (2017) or Christl, Köppl-Turyna and Kucsera (2017). The new Austrian reform to reduce the tax burden for families with children consists of four parts.…”

Trapped in inactivity? Social assistance and labour supply in Austria

“…4 in the "Appendix") and by skill level (Table 21 in the "Appendix") to validate the labour supply model. The elasticities are in line with the findings of other studies, for example, Bargain et al (2014) and Christl et al (2019), but slightly higher than the results derived by Müllbacher and Nagl (2017).…”