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The impact of in-work benefits on female labor supply and income distribution in Spain

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  • Ayala, Luis
  • Paniagua, Milagros

Abstract

In-work benefits (IWBs) have become very common transfer programs that seek to meet both efficiency and equity targets. An expanding literature has assessed the effects of these policies on income distribution and labor supply showing important implications for female labor participation. In this paper, we estimate the distributional and behavioral impacts of a simulated IWB in Spain based on the replacement of the existing working mother tax credit (WMTC) using as a reference the US Earned Income Tax Credit (EITC). We simulate the effects of the proposed scheme using EUROMOD and a discrete choice model of labor supply. Our results show that the enhancement of the proposed IWB would have significant and positive effects both in terms of female labor participation and inequality and poverty reduction. The introduction of this IWB would generate a substantial increase in labor participation at the extensive margin and a non-negligible reduction at the intensive margin.

Suggested Citation

  • Ayala, Luis & Paniagua, Milagros, 2017. "The impact of in-work benefits on female labor supply and income distribution in Spain," EUROMOD Working Papers EM17/17, EUROMOD at the Institute for Social and Economic Research.
    • Handle: RePEc:ese:emodwp:em17-17
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    Cited by:

    1. Benczúr, Péter & Kátay, Gábor & Kiss, Áron, 2018. "Assessing the economic and social impact of tax and benefit reforms: A general-equilibrium microsimulation approach applied to Hungary," Economic Modelling, Elsevier, vol. 75(C), pages 441-457.
    2. Lucía Gorjón García & Antonio Villar, 2019. "The Minimum Income Scheme as a poverty reduction mechanism:the case of the Basque Country," Studies on the Spanish Economy eee2019-10, FEDEA.
    3. Sara Rica & Lucía Gorjón, 2019. "Assessing the impact of a minimum income scheme: the Basque Country case," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 10(3), pages 251-280, November.
    4. Miguel Gómez de Antonio & Noemí Villazán Pellejero, 2023. "Propuesta de implantación de políticas de complemento salarial en el Ingreso Mínimo Vital y en el IRPF: un análisis empírico con EUROMOD," Hacienda Pública Española / Review of Public Economics, IEF, vol. 245(2), pages 35-69, June.

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