Carsten Schröder

Nonmarket Household Time and the Cost of Children

Raising children demands a considerable amount of parental time, obliging working parents either to reduce their leisure time further or to buy childcare services in the market. Parents may face additional opportunity costs upon deciding to participate in the labor market, but these are difficult to measure. Using a survey instrument in Belgium and Germany, we estimate the income compensation needed to maintain family well-being when adults work versus when they do not enter the labor market. In both countries we find that full-time working parents face extra child costs and require higher labor market participation compensation compared with childless adults.

The effect of saving subsidies on household saving: Evidence from Germany

Since 2002 the German government seeks to stimulate private retirement savings by means of special allowances and tax exemptions – the so-called Riester scheme. We apply matching and panel regression techniques to assess the impact of the Riester scheme on households’ propensities to save in a natural experiment framework. Estimation results from both the German Socio-Economic Panel and the SAVE study indicate that private saving was hardly affected by the introduction of the Riester scheme.

Properties of Equivalence Scales in Different Countries

Recent studies in high-income industrialized countries have shown that equivalence scales are income-dependent. We investigate whether this dependence also holds in poorer, services oriented countries, by considering the example of Cyprus. We also examine whether household economies of scale and relative children costs differ.

Incomes and Inequality in the Long Run: The Case of German Elderly

Abstract We use German Sample Survey income data to examine the income distribution for elderly individuals during the period from 1978 to 2003. The elderly population, defined as people of age 55 and older, is decomposed by people resident in the Old and New Federal States. Further, we distinguish between persons receiving old-age pensions and persons who do not. Inequality estimates are decomposed by income components, and the bootstrap method is used to test for statistical significance of results.

Compiling a harmonized database from Germany’s 1978 to 2003 sample surveys of income and expenditure

We outline a procedure for unifying various cross sections of the German Sample Survey of Income and Expenditure in a pooled database, and discuss potential pitfalls of such a venture. Particularly, we investigate the consequences of a major break in the survey design for inter-temporal comparability of expenditure distributions: a reduction of the surveying period from twelve to three month taking place between the census years 1993 and 1998. We demonstrate that the shortened survey period impacts the commodity-specific expenditure distributions differently, and that different commodity-specific purchase frequencies are a likely explanation. Moreover, we suggest and empirically assess the suitability of several conversion procedures to ensure comparability of the expenditure distributions before and after the shortening of the surveying period.ZusammenfassungDer vorliegende Beitrag zeigt die Möglichkeiten und Grenzen eines Versuchs, sechs Querschnitte der Einkommens- und Verbrauchsstichprobe (1978 bis 2003) intertemporal vergleichbar aufzubereiten. Insbesondere werden die Effekte eines Bruchs in der Erhebungsmethode auf die in den Querschnitten verzeichneten Ausgabenvariablen untersucht: Während die Daten in den Ausgabenvariablen der Querschnitte 1978 bis 1993 auf Jahresangaben der Befragten beruhen, dienen seit 1998 Quartalsangaben als Datengrundlage. Wir zeigen, dass diese Verkürzung der Befragungsperiode gerade bei unregelmäßig erworbenen dauerhaften Konsumgütern die intertemporale Vergleichbarkeit der Ausgabenvariablen einschränken kann. Aufbauend auf unseren Befunden schlagen wir verschiedene Möglichkeiten zur Harmonisierung vor und überprüfen deren Eignung.

Fiscal Federalism and Tax Administration -- Evidence From Germany

In many federations, fiscal equalization schemes soften fiscal imbalances across the member states. Such schemes usually imply that the member states internalize only a small fraction of the additional tax revenue from an expansion of the state-specific tax bases, while the remainder of the additional tax revenue is redistributed horizontally or vertically. We address the question as to which extent state-level jurisdictions in such a federation underexploit their tax bases. By means of a stylized model we show that the state authorities in such a federation have incentives to align the effective tax rates of their residents to the internalized fraction of marginal tax revenue. We empirically test the model using three setups: one state level exercise and two micro level exercises using administrative income-tax data in form of an OLS regression and a natural-experiments design. All setups support the results from our theoretical model.

Country Inequality Rankings and Conversion Schemes

Two conversion schemes may be employed for assessing income inequality from household equivalent incomes: to weight household units by size or by needs. Using data from the Luxembourg Income Study, we show the sensitivity of country inequality rankings to conversion schemes and explain the finding by means of inequality decomposition. A bootstrap approach is implemented to test for statistical significance of our results.

Family-Type Subsistence Incomes

Different family types may have a fixed flow of consumption costs, related to subsistence needs. We use a survey method in order to identify and estimate such a fixed component of spending for different families. Our method involves making direct questions about the linkup between aggregate disposable family income and well-being for different family types. Conducting our survey in six countries, Germany, France, Cyprus, China, India and Botswana, we provide evidence that fixed costs of consumption are embedded in welfare evaluations of respondents. More precisely, we find that the formalized relationship between welfare-retaining aggregate family incomes across different family types, suggested by Donaldson and Pendakur (2005) and termed “Generalized Absolute Equivalence Scale Exactness,” is prevalent and robust in our data. We use this relationship to identify subsistence needs of different family types and to calculate income inequality.

Non-Market Time and Household Well-Being

A distinguishing feature among households is whether adult members work or not, since the employment status affects a households available time for home activities. Using a survey method in two countries, Belgium and Germany, we provide household incomes that retain the level of well-being across different family types, distinguished by family size and employment status of adults. Our tests support that specialization in home production and childcare-time costs are important determinants of household well-being. Estimates of child costs relative to an adult are higher for households that are time-constrained (all adults in the household work), and also higher for poorer households.

Revisiting the Evidence for a Cardinal Treatment of Ordinal Variables

Well‐being (i.e., satisfaction, happiness) is a latent variable, impossible to observe directly. Hence, questionnaires ask people to grade their well‐being in different life domains. The most common practice—comparing well‐being by means of descriptive analysis or linear regressions—ignores that the underlying collected well‐being information is ordinal. If the well‐being function is ordinal, then monotonic transformations are allowed. We demonstrate that treating ordinal data by methods intended to be used for cardinal data may give an incorrect impression of a robust result. Particularly, we derive the conditions under which the use of cardinal method to an ordinal variable gives an illusionary sense of robustness, while in fact one can reverse the conclusion reached by using an alternative cardinal assumption. The paper provides empirical applications.