Public Finance and Environmental Economics

In the field of public finance, improved access to micro data has improved the conditions for empirical research. The IAW uses data from the German Taxpayer Panel, which links individual data from the annual income tax statistics to a panel data set. This new data set permits, amongst other things, to analyze how taxpayers respond to changes in tax law, because individual behaviour can be observed over time. The results can then be used to estimate the effects of actual or potential tax reforms more precisely. This kind of research has a clear connection to evaluation research.

The quantitative method primarily used in this research area is micro simulation. This method allows prediction of economy-wide effects of tax reforms on government revenue. Moreover, their distributional effects can be determined in detail and the losers and winners of tax reforms can be identified. On this basis, the effects of financial policies can be evaluated. The results point out how public expenditures may be financed more efficiently and how tax payers and companies can be unburdened.

In the field of environmental economics, the IAW gives attention to selected economic aspects of environmental policy. Important topics are the employment effects of environmental protection measures and excessive land consumption in Germany. The focus of this latter line of research is on the development of market-based instruments that limit land consumption in an economically efficient way. In this context, the IAW has designed new policy approaches. An interface exists with the IAW research conducted in the field of regional economics. Data infrastructure is also an important topic. Currently, the linking of environmental economic data with other company data is being explored in detail.

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