The impact of income taxation on the ratio between reservation and market wages and the incentives for labour supply

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may DIW BerlinLudovica Gambaro ‡ LSE LondonPeter Haan § DIW BerlinAbstract 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.

The Gender Gap in Wage Expectations: Do Young Women Trade Off Higher Wages for Lower Wage Risk?

“…Nevertheless, throughout this study I include an indicator variable accounting for the information intervention. For further details on the financial intervention seePeter et al (2016a); and for the information intervention seePeter et al (2016b) andPeter and Zambre (2017).7 The literature on reservation wages, for example, reports item non-response rates of similar magnitude if questions are included in surveys that do not exclusively focus on this issue (e.g Caliendo et al, 2009)…”