apply this method to decompose the increase in income inequality in Germany from 2002 to 2011, a period that saw tax … reductions and a controversial overhaul of the transfer system. The simulations show that tax and transfer reforms have had an …

. Using the German Socio-Economic Panel and the microsimulation model STSM, we find that hours and participation elasticities … the working poor. The first reform is financed through an increase in the effective marginal tax rate for welfare …