The Excess Demand for Subsidized Child Care in Germany

The extension of subsidized child care is currently on the top of the political agenda in Germany. In this paper the excess demand for subsidized child care slots is estimated using a partial observability model in the style of Abowd and Farber (1982). The results show that more than 50 percent of children aged 0-3 are queuing for child care slots, whereas only 10 percent of children aged 4-6 years are queuing. For children in the younger age group about 255,000 child care slots are missing. This number comes close to the government's plan to expand subsidized child care by 230,000 slots.Child care; Excess demand; Partial observability model

Child Care Costs and Mothers' Labor Supply: An Empirical Analysis for Germany

This study analyzes the effect of child care costs on the labor supply of mothers with preschool children in Germany using data from the German Socio-Economic Panel (2002). Child care costs are estimated on the basis of a sample selection model. A structural household utility model, which is embedded in a detailed tax-benefit model, is used for labor supply estimation. In contrast to a previous German study, I find significant effects of child care costs on mother's labor supply. Compared to other countries such as the US, Canada or the UK, the effects are rather small, which can be explained by the fact that child care costs are already heavily subsidized in Germany.Child care costs; Labor supply estimation

Does Distance Determine Who Attends a University in Germany?

We analyze the role of distance from a university in the decision to attend higher education in Germany. Students who live near a university can avoid moving and the increased living expenses by commuting. Thus, transaction cost arguments would suggest that the greater the distance to the nearest university, the lower the participation in higher education. We analyze this hypothesis by combining data from the German Socio-Economic Panel Study (SOEP) with a database from the German Rectors’ Conference on university postal codes. Based on a discrete time hazard rate model we show that distance to the next university at the time of completing high school significantly affects the decision to enrol in tertiary education. Controlling for many other socio-economic and regional variables, we find that 1 kilometre distance decreases the probability to enrol in higher education by 0.2-0.3 percentage points.competing risk model, distance to university, higher education

The Parental Leave Benefit Reform in Germany: Costs and Labour Market Outcomes of Moving towards the Scandinavian Model

Germany is known to have one of the lowest fertility rates among Western European countries and also relatively low employment rates of mothers with young children. Although these trends have been observed during the last decades, the German public has only recently begun discussing these issues. In order to reverse these trends, the German government recently passed a reform of the parental leave benefit system in line with the Scandinavian model. The core piece of the reform is the replacement of the existing means-tested parental leave benefit by a wage-dependent benefit for the period of one year. In this paper we simulate fiscal costs and expected labour market outcomes of this reform. Based on a micro-simulation model for Germany we calculate first-round effects, which assume no behavioural changes and second-round effects, where we take labour supply changes into account. Our results show that on average all income groups, couples and single households, benefit from the reform. The calculation of overall costs of the reform shows that the additional costs are moderate. As far as the labour market behaviour of parents is concerned, we find no significant changes of labour market outcomes in the first year after birth. However, in the second year, mothers increase their working hours and labour market participation significantly. Our results suggest that the reform will achieve one of its aims, namely the increase in the labour market participation of mothers with young children.female labour supply, parental leave, micro simulation study

Does Distance Determine Who Attends a University in Germany?

We analyze the role of distance from a university in the decision to attend higher education in Germany. Students who live near a university can avoid moving and the increased living expenses by commuting. Thus, transaction cost arguments would suggest that the greater the distance to the nearest university, the lower the participation in higher education. We analyse this hypothesis by combining data from the German Socio-Economic Panel Study (SOEP) with a database from the German Rectors' Conference on university postal codes. Based on a discrete time hazard rate model we show that distance to the next university at the time of completing high school significantly affects the decision to enrol in tertiary education. Controlling for many other socio-economic and regional variables, we find that 1 kilometre distance decreases the probability to enrol in higher education by 0.2 - 0.3 percentage pointsHigher education, distance to university, competing risk model

Household Taxation, Income Splitting and Labor Supply Incentives: A Microsimulation Study for Germany

We analyze potential labor supply effects of a shift from the current German system of taxation of married couples to a system of limited real income splitting on the basis of econometric household labor supply model embedded in a tax-benefit model. Our simulation results show relatively small labor supply effects of a shift from the current system to one limited real income splitting system. In the benchmark scenario of a shift to separate taxation labor supply of wives would increase substantially in west Germany, while a significant number of husbands would drop out of the labor force.

Preferences for Childcare Policies: Theory and Evidence

We analyse preferences for public, private or mixed provision of childcare theoretically and empirically. We model childcare as a publicly provided private good. Richer households should prefer private provision to either pure public or mixed provision. If public provision redistributes from rich to poor, they should favour mixed over pure public provision, but if public provision redistributes from poor to rich, the rich and poor might favour mixed provision while the middle class favour public provision ('ends against the middle'). Using estimates for household preferences from survey data, we find no support for the ends-against-the-middle result.Childcare, redistribution, political preferences, public provision of private goods

Evaluating the German "Mini-Job" Reform Using a True Natural Experiment

Increasing work incentives for people with low incomes is a common topic in the policy debate across European countries. The "Mini-Job" reform in Germany - introduced on April 1, 2003 - can be seen in line with these policies, exempting labour income below a certain threshold from taxes and employees' social security contributions. We carry out an ex-post evaluation to identify the short-run effects of this reform. Our identification strategy uses an exogenous variation in the interview months in the German Socio-Economic Panel, that allows us to distinguish groups that are (or are not) affected by the reform. To account for seasonal effects we additionally use a difference-in-differences strategy. The results show that the short-run effects of the reform are limited. We find no significant short-run effects for marginal employment. However, there is evidence that single men who are already employed react immediately and increase secondary job holding.Evaluation, natural experiment, difference-in-differences, marginal employment

Optimal Taxation: The Design of Child Related Cash- and In-Kind-Benefits

This paper contributes to the debate about the optimal design of tax-transfer systems. Based on the theory of optimal taxation, combined with microsimulation and microeconometric techniques we derive the welfare function which makes the current German tax and transfer system for single women optimal. Furthermore, we compare the welfare function conditional on the presence and age of children and assess how reforms of in-kind childcare transfers would affect the welfare function. This analysis allows us to derive conclusions about the optimal design of child related transfers and in-kind benefits.Optimal taxation, labor supply behavior, transfers for children

Preferences for Childcare Policies: Theory and Evidence

We analyse preferences for public, private or mixed provision of childcare theoretically and empirically. We model childcare as a publicly provided private good. Richer households should prefer private provision to either pure public or mixed provision. If public provision redistributes from rich to poor, they should favour mixed over pure public provision, but if public provision redistributes from poor to rich, the rich and poor might favour mixed provision while the middle class favour public provision ('ends against the middle'). Using estimates for household preferences from survey data, we find no support for the ends-against-the-middle result.childcare, redistribution, political preferences, public provision of private goods