The aim of the project was to quantify the distributional effects of alternative wage subsidies taking into account fiscal costs and the effects of ways to refinance these costs. The main difficulty in the analysis arises from the complexity of the German tax and benefit system, especially the interdependence of its components. Therefore, the tax and benefit microsimulation model STSM had to be adopted and further developed in the project. The STSM calculates taxes and benefits for households of the German Socio-economic Panel for alternative wage subsidy reform proposals and for different numbers of working hours. It also entails a microeconometric labour supply model that allows to estimate the labour supply and employment effects of the proposals. On the basis of the STSM the distributional effects and fiscal costs of recent reform proposals were analysed. These include social security contribution subsidies an further reaching reforms of welfare transfers that combine the reduction of welfare payments for persons who are considered able to work with lower withdrawel rates.