Behavioral Microsimulation Of A Dual Income Tax Reform: A Mixed-Logit Approach

Abstract

Simulation studies of the economic impact of dual income taxes are almost always based on general equilibriummodels. They assume one representative household. Their results are sensitive to one behavioral parameter, the labor supply elasticity, which is assumed to be given a priori — instead of being estimated. This paper shows how to model the labor supply incentive effects of a Dual Income Tax reform based on a sample of thousands of households representative for the population in Germany and using flexible mixed logit simulation estimators.