Family and gender still matter: the heterogeneity of returns to education in Germany

Using information on family background, we estimate returns to education, allowing for the heterogeneity of returns. In order to control for the unobserved heterogeneity shared by family members, we construct a siblings sample and employ family fixed-effects and family correlated random-effects models. Our main result is that family background still matters despite the substantial political efforts to equalize educational opportunities in Germany. Persons with less-educated parents earn lower wages, but have higher returns to education. This supports the view that persons from less-educated backgrounds still face higher marginal costs in the educational system. The same interplay between the wage level and marginal returns is found for the effect of gender and cohort. --Returns to education,siblings analysis,heterogeneity of returns

Rates of Return of the German Pay-As-You-Go Pension System

Due to population aging, contribution rates of the mandatory German pay-as-you-go pension system are expected to increase dramatically during the next decades. This paper estimates the impact on the expected returns of contributions for different cohorts. I show that rates of return for younger cohorts will be between zero and one percent, depending on the demographic and economic scenarios; for some demographic groups they become negative. The implicit tax rates reach levels of around two-thirds of contributions for the youngest cohorts. If decreasing returns reduce incentives for labor supply and system participation, the whole system may become unsustainable. Indeed, I find empirical evidence for a recent decline of voluntary contributions and for a substitution away from taxable employment.

Distributional and behavioural effects of the German labour market reform

"We estimate the effects of the reform of German Unemployment Insurance that replaced the wage-related Unemployment Assistance with an income maintenance Programme and stronger means testing. We model the tax-benefit system and use the Socio-Economic Panel. We estimate a discrete labour supply model and simulate the behavioural and distributional effects using the pseudo distribution method. Poverty and inequality decline overall, since households with children and low incomes gain, while those who used to earn high wages and received high unemployment transfers lose most. The behavioural responses mitigate the redistributive impact of the reform." (Author's abstract, IAB-Doku) ((en)) Additional Information Kurzfassung (deutsch) Executive summary (English)Arbeitsmarktpolitik, Verteilungseffekte, Einkommensverteilung, soziales System, Einkommenseffekte, Sozialleistungen, Arbeitslosengeld II-Empfänger, Arbeitslosengeld II, Einkommenshöhe, Familieneinkommen, soziale Gerechtigkeit, Erwerbsbeteiligung, Beschäftigungseffekte, Umverteilung, Armutsbekämpfung, Arbeitslose, Arbeitsuchende, Arbeitsuche, Erwerbsverhalten

Does family background matter? : Returns to education and family characteristics in Germany

This paper examines the impact of family background on wages and returns to education. Using data from the GSOEP, we show that family background matters in the determination of wages. Moreover, returns to education appear to be heterogeneous with family background accounting for part of this heterogeneity. Estimated returns to education are higher for individuals from families with lower education levels. However, a simple regression analysis suffers from serious endogeneity problems. The construction of a sibling sample allows to control for unobserved characteristics that are shared by family members. Using a family fixed-effects estimation we attempt to reduce the endogeneity bias. Our results suggest that the conventional estimates overstate the returns to education. Moreover, family background accounts or a large part of the variation in wages in the sibling sample

Family and Gender Still Matter: The Heterogeneity of Returns to Education in Germany

Using information on family background, we estimate returns to education, allowing for the heterogeneity of returns. In order to control for the unobserved heterogeneity shared by family members, we construct a siblings sample and employ family fixed-effects and family correlated random-effects models. Our main result is that family background still matters despite the substantial political efforts to equalize educational opportunities in Germany. Persons with less-educated parents earn lower wages, but have higher returns to education. This supports the view that persons from less-educated backgrounds still face higher marginal costs in the educational system. The same interplay between the wage level and marginal returns is found for the effect of gender and cohort

Rates of return of the German pay-as-you-go pension system

Due to population aging, contribution rates of the mandatory German pay-as-you-go pension system are expected to increase dramatically during the next decades. This paper estimates the impact on the expected returns of contributions for different cohorts. I show that rates of return for younger cohorts will be between zero and one percent, depending on the demographic and economic scenarios; for some demographic groups they become negative. The implicit tax rates reach levels of around two-thirds of contributions for the youngest cohorts. If decreasing returns reduce incentives for labor supply and system participation, the whole system may become unsustainable. Indeed, I find empirical evidence for a recent decline of voluntary contributions and for a substitution away from taxable employment

Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis

This paper analyses the effects of a social assistance reform in Germany. In contrast to studies which are based on microsimulation methods we use a computable general equilibrium model which incorporates a discrete choice model of labour supply to simulate a variety of reform scenarios. The main contribution is that we are able to identify general equilibrium effects of a reform on wages and unemployment. The simulation results show that general equilibrium wage reactions tend to mitigate labour supply effects. Moreover, the simulations indicate that substantial employment effects are to be expected only from major cuts in welfare payments. --social assistance,discrete labour supply model,applied general equilibrium

The gender gap in labor market participation and employment: a cohort analysis for West Germany

Labor market participation rates of West German females have risen during the last decades, whereas participation rates of males have declined or remained stable. Nevertheless, differences in aggregate gender specific participation rates remain. The purpose of this paper is to compare life cycle participation and employment profiles of West German males and females of different skill levels. Going beyond the descriptive cross tabulations of participation and employment rates by year, skill level, and sex, this paper uses a model which simultaneously takes into account the effects of time, age, and birth cohort membership. The estimation results allow for the construction and comparison of gender and skill specific life cycle participation and employment profiles. Even though the gap in average participation and employment rates has narrowed over time, the results confirm a persistent gender gap in the pattern of labor market participation and employment over the life cycle. --Gender Gap in Employment and Participation,Cohort Analysis