Nico Pestel

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Nico Pestel
Institute for the Study of Labor (IZA)
Schaumburg-Lippe-Straße 5-9
53113 Bonn, Germany

phone: +49 228 3894-160
fax: +49 228 3894-510
e-mail: pestel@iza.org

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Publications

Refereed International Journals

  • The Politicians' Wage Gap: Insights from German Members of Parliament, forthcoming in: Public Choice, DOI: 10.1007/s11127-012-9921-4 (with A. Peichl and S. Siegloch).

    Using a unique dataset of German members of parliament (MPs), this paper analyzes the politicians' wage gap (PWG). After controlling for observable characteristics as well as accounting for election probabilities and campaigning costs, we find a positive income premium for MPs which is statistically and economically significant. Our results are consistent with the citizen candidate model, with a PWG of 35%-65% when comparing MPs to citizens occupying executive positions. However, it shrinks to zero when restricting the control group to top level executives.

  • Multidimensional Well-Being at the Top: Evidence for Germany, forthcoming in: Fiscal Studies (with A. Peichl).

    This paper employs a multidimensional approach for the measurement of well-being at the top of the distribution using German SOEP micro data. Besides income as traditional indicator for material well-being, we include health as a proxy for nonmaterial quality of life as well as self-reported satisfaction with life as dimensions. We find that one third of the German population is well-off in at least one dimension but only one percent in all three dimensions simultaneously. While the distribution of income has become more concentrated at the top, the concentration at the top of the multidimensional well-being distribution has decreased over time. Moreover, health as well as life satisfaction contribute substantially to multidimensional wellbeing at the top which has important policy implications.

  • Does Size Matter? The Impact of Changes in Household Structure on Income Distribution in Germany, Review of Income and Wealth, 2012, 58(1), 118-141 (with A. Peichl and H. Schneider).

    Income inequality in Germany has been continually increasing during the past 20 years. One cause of this development, among others, could be structural shifts in household formation due to long-term societal trends. These affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the growth of the income gap in Germany (for both East and West from 1991 to 2007) is indeed strongly related to changes in household structure and employment behavior, and a large part of this increase is compensated by the welfare state.

Refereed German Journals

  • Einfach ist nicht immer gerecht: Eine Mikrosimulationsstudie der Kirchhof-Reform für die Einkommensteuer, Vierteljahrshefte zur Wirtschaftsforschung, 2011, 80(4), 147-160 (with M. Löffler, A. Peichl, H. Schneider and S. Siegloch).

    In this contribution we analyze Paul Kirchhof’s income tax policy proposal with regard to conflicting goals of tax revenue, distributional effects and efficiency considerations. While effects on labor supply are moderate, the tax policy proposal reduces government budget revenue by 20 billion euros. Moreover, it has a considerable effect on income inequality. Despite broadening the tax base only the income distribution’s top decile benefits from the proposed flat tax rate. Due to these problematic effects we conclude that the Kirchhof proposal is not politically enforceable.

  • Mehr Ungleichheit durch kleinere Haushalte? Der Zusammenhang zwischen Veränderungen der Haushaltsstruktur und der Einkommensverteilung in Deutschland, Zeitschrift für Arbeitsmarkt-Forschung – Journal for Labour Market Research, 2011, 43(4), 327-338 (with A. Peichl and H. Schneider).

    Income inequality in Germany has been increasing continuously during the past 20 years. In general, this is understood as an increase in inequality of wages due to changes in bargaining power of employees. However, the role of changing household structure is widely neglected. Societal trends like a decline in birth rate and an increase in the risk of divorce affect per capita incomes, which has repercussions for the income distribution even if wages remain constant. The aim of this paper is to quantify the proportion of changing household structures in the increase in inequality. We find that the rise in inequality was indeed more due to demographic trends rather than changes in wages. Moreover, a large part of this increase is compensated by the welfare state.

  • Reform der Hartz IV-Hinzuverdienstregelungen: Ein verfehlter Ansatz, Perspektiven der Wirtschaftspolitik, 2011, 12(1), 12-26 (with A. Peichl, H. Schneider and S. Siegloch).

    In Germany, both policy makers and researchers have been searching for solutions to overcome the disincentives on labor supply generated by income allowances for welfare recipients (Unemployment Benefit II). Taking proposals of the German Economic Institute (IW) and the governing Liberal Party (FDP) as a starting point, the German Federal Government has intensely discussed this topic during fall 2010 and finally proposed a reform in legislation. In this study, we analyze the potential labor supply effects of the legislated reform and the preceding proposals. In a second step, we augment the different scenarios with a working hours requirement to ensure that only those are subsidized, whose earned income is low due to low hourly wages rather than few working hours. Our simulations confirm the well-known trade-off of in-work benefits: Without working time requirement they tend to create incentives for welfare recipients to increase their labor supply, such that overall labor supply rises. However, the more generous the allowable income regulation, the more expensive the reform gets for the government budget. This comes mainly from the increasing incentive to reduce working hours for those located around the phasing-out level of income. This predominantly affects secondary earners. A working hours requirement reduces these effects and causes more favorable labor market effects and consequently much lower fiscal costs.

Non-Refereed Journals

  • Bemessungsgrundlage kontra Fünf-Stufen-Tarif: Eine Simulationsanalyse des Reformvorschlags nach Rose, Wirtschaftsdienst, 2011, 91(5), 328-332 (with A. Peichl, H. Schneider and S. Siegloch).

    Die Komplexität des deutschen Steuersystems hat in den vergangenen Jahren immer wieder Kritik hervorgerufen und zu verschiedenen Verbesserungsvorschlägen geführt, von denen jedoch bislang noch keiner ungesetzt wurde. Denn um eine breite politische Akzeptanz zu erlangen, müssen Reformvorschläge zum Steuersystem neben Transparenz und Einfachheit gleichzeitig sicherstellen, dass die Einkommensungleichheit nicht verschärft, das Steueraufkommen insgesamt nicht zu gering wird und die Erwerbsanreize nicht gefährdet sind. Durch Steuervereinfachung alleine werden diese Ziele nicht per se erreicht.

Policy Contributions

  • Aktivierung von Fachkräftepotenzialen: Frauen und Mütter, Kurzexpertise im Auftrag des Bundesministeriums für Arbeit und Soziales, IZA Research Report No. 39 (with W. Eichhorst, M.J. Kendzia, A. Peichl, S. Siegloch and V. Tobsch)

  • Gutachten zur Berechnung von Vorschlägen zur Neuregelung der Erwerbstätigenfreibeträge, IZA Research Report No. 32 (with A. Peichl, H. Schneider and S. Siegloch).

  • Alter Wein in neuen Schläuchen: Der Fünf-Stufen-Steuertarif der FDP auf dem Prüfstein, IZA Standpunkte No. 27 (with A. Peichl, H. Schneider and S. Siegloch).