We develop a simulation model of household behaviour in which both the consumption/saving and labour/leisure choices are endogenous. This model is used to explore the effects of the UK and Danish state tax and benefit systems on the labour supply of workers aged 50 or over. We find that, in broad terms, differences in labour force participation can be accounted for by differences in benefit structures. Furthermore, our simulations suggest that the UK system is preferred by young people while the Danish arrangement which imposes a larger tax burden and provides larger welfare benefits is chosen by people of 50 or older. Notably, people older than 60 are in the majority in the simulated population. The Danish system does not promote notably greater equality over the lifetime, but it does underpin a higher level of consumption for people of 50 or older.
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Article provided by Institute for Fiscal Studies in its journal Fiscal Studies.
Volume (Year): 26 (2005) Issue (Month): 1 (March) Pages: 83-118 Download reference. The following formats are available: HTML
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Handle: RePEc:ifs:fistud:v:26:y:2005:i:1:p:83-118
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