Advanced Search
MyIDEAS: Login to save this paper or follow this series

Tax-Benefit Systems in Europe and the US: Between Equity and Efficiency

Contents:

Author Info

  • Bargain, Olivier
  • Dolls, Mathias
  • Neumann, Dirk
  • Peichl, Andreas
  • Siegloch, Sebastian

Abstract

Whether observed differences in redistributive policies across countries are the result of differences in social preferences or efficiency constraints is an important question that paves the debate about the optimality of welfare regimes. To shed new light on this question, we estimate labor supply elasticities on microdata and adopt an inverted optimal tax approach to characterize the redistributive preferences embodied in the welfare systems of 17 EU countries and the US. Implicit social welfare functions are broadly compatible with the fiction of an optimizing Paretian social planner. Some exceptions due to generous demogrant transfers are consistent with the ignorance of behavioral responses by some European governments and are partly corrected by recent policy developments. Heterogeneity in leisure-consumption preferences somewhat affect the international comparison in degrees of revealed inequality aversion, but differences in social preferences are significant only between broad groups of countries. Â

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: https://www.iser.essex.ac.uk/publications/working-papers/euromod/em2-11.pdf
Download Restriction: no

Bibliographic Info

Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number EM2/11.

as in new window
Length:
Date of creation: 01 Aug 2011
Date of revision:
Publication status: published
Handle: RePEc:ese:emodwp:em2-11

Contact details of provider:
Postal: RAB Butler Building, University of Essex, Wivenhoe Park, Colchester, ESSEX C04 3SQ
Phone: +44 (0)1206 872957
Fax: +44 (0)1206 873151
Email:
Web page: https://www.iser.essex.ac.uk/euromod/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Peter Haan & Katharina Wrohlich, 2007. "Optimal Taxation: The Design of Child Related Cash- and In-Kind-Benefits," Discussion Papers of DIW Berlin 737, DIW Berlin, German Institute for Economic Research.
  2. Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2006. "The Optimal Income Taxation of Couples," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5978, C.E.P.R. Discussion Papers.
  3. Tim Callan & Arthur van Soest & John R. Walsh, 2009. "Tax Structure and Female Labour Supply: Evidence from Ireland," LABOUR, CEIS, CEIS, vol. 23(1), pages 1-35, 03.
  4. Bradley T. Heim & Bruce D. Meyer, 2003. "Work Costs and Nonconvex Preferences in the Estimation of Labor Supply Models," NBER Working Papers 9429, National Bureau of Economic Research, Inc.
  5. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 117(3), pages 1039-1073, August.
  6. Soest, A.H.O. van & Das, J.W.M., 2000. "Family Labor Supply and Proposed Tax Reforms in the Netherlands," Discussion Paper, Tilburg University, Center for Economic Research 2000-20, Tilburg University, Center for Economic Research.
  7. Eichhorst, Werner & Konle-Seidl, Regina, 2005. "The interaction of labor market regulation and labor market policies in welfare state reform," IAB Discussion Paper 200519, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  8. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(3), pages 1063-1114, August.
  9. Senik, Claudia, 2005. "Ambition and jealousy. Income Interactions in the "old" Europe versus The "New" Europe and the United States," CEPREMAP Working Papers (Docweb), CEPREMAP 0510, CEPREMAP.
  10. Amedeo Spadaro & Lucia Mangiavacchi & Luca Piccoli, 2012. "Optimal taxation, social contract, and the four worlds of welfare capitalism," DEA Working Papers, Universitat de les Illes Balears, Departament d'Economía Aplicada 51, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  11. Kanbur, Ravi & Pirttila, Jukka & Tuomala, Matti, 2004. "Non-Welfarist Optimal Taxation And Behavioral Public Economics," Working Papers, Cornell University, Department of Applied Economics and Management 127150, Cornell University, Department of Applied Economics and Management.
  12. Bargain, Olivier & Orsini, Kristian & Peichl, Andreas, 2011. "Labor Supply Elasticities in Europe and the US," EUROMOD Working Papers EM1/11, EUROMOD at the Institute for Social and Economic Research.
  13. François Bourguignon & Amadéo Spadaro, 2005. "Tax-benefit revealed social preferences," PSE Working Papers halshs-00590779, HAL.
  14. van Soest, Arthur & Das, Marcel & Gong, Xiaodong, 2000. "A Structural Labour Supply Model with Nonparametric Preferences," IZA Discussion Papers 211, Institute for the Study of Labor (IZA).
  15. Laurent Simula & Alain Trannoy, 2006. "Optimal Linear Income Tax when Agents Vote with their Feet," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 62(3), pages 393-415, September.
  16. Hoynes, Hilary Williamson, 1996. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP," Econometrica, Econometric Society, Econometric Society, vol. 64(2), pages 295-332, March.
  17. Boone, Jan & Bovenberg, Lans, 2004. "The optimal taxation of unskilled labor with job search and social assistance," Journal of Public Economics, Elsevier, Elsevier, vol. 88(11), pages 2227-2258, September.
  18. Herwig Immervoll, 2004. "Average and Marginal Effective Tax Rates Facing Workers in the EU: A Micro-Level Analysis of Levels, Distributions and Driving Factors," OECD Social, Employment and Migration Working Papers 19, OECD Publishing.
  19. James Banks & Richard Disney & Alan Duncan & John Van Reenen, 2005. "The Internationalisation of Public Welfare Policy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(502), pages C62-C81, 03.
  20. Angeletos, George-Marios & Alesina, Alberto, 2005. "Fairness and Redistribution," Scholarly Articles 4553009, Harvard University Department of Economics.
  21. Saez, Emmanuel, 2001. "Using Elasticities to Derive Optimal Income Tax Rates," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(1), pages 205-29, January.
  22. Stancanelli, Elena G.F., 2008. "Evaluating the impact of the French tax credit on the employment rate of women," Journal of Public Economics, Elsevier, Elsevier, vol. 92(10-11), pages 2036-2047, October.
  23. John Creedy & Guyonne Kalb & Rosanna Scutella, 2003. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Melbourne Institute Working Paper Series, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne wp2003n21, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  24. Vincenzo Atella & Jay Coggins & Federico Perali, 2004. "Aversion to inequality in Italy and its determinants," Journal of Economic Inequality, Springer, Springer, vol. 2(2), pages 117-144, August.
  25. Samuel Bentolila & Andrea Ichino, 2008. "Unemployment and consumption near and far away from the Mediterranean," Journal of Population Economics, Springer, Springer, vol. 21(2), pages 255-280, April.
  26. André DECOSTER & Erik SHCOKKAERT, 1989. "Equity and efficiency of a reform of Belgian indirect taxes," Discussion Papers (REL - Recherches Economiques de Louvain) 1989023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  27. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(2), pages 605-37, May.
  28. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Nicolaj Verdelin, 2008. "An Evaluation of the Tax-Transfer Treatment of Married Couples in European Countries," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 08-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  29. Bargain, Olivier & Doorley, Karina, 2011. "Caught in the trap? Welfare's disincentive and the labor supply of single men," Journal of Public Economics, Elsevier, Elsevier, vol. 95(9), pages 1096-1110.
  30. Viktor Steiner & Katharina Wrohlich, 2004. "Work Incentives and Labor Supply Effects of the 'Mini-Jobs Reform' in Germany," Discussion Papers of DIW Berlin 438, DIW Berlin, German Institute for Economic Research.
  31. Robert A. Moffitt, 2003. "Introduction to "Means-Tested Transfer Programs in the United States"," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 1-14 National Bureau of Economic Research, Inc.
  32. Decoster, André & Haan, Peter, 2010. "Empirical Welfare Analysis in Random Utility Models of Labour Supply," IZA Discussion Papers 5301, Institute for the Study of Labor (IZA).
  33. Peter Lambert & Xavier Ramos, 1997. "Horizontal Inequity and Vertical Redistribution," International Tax and Public Finance, Springer, Springer, vol. 4(1), pages 25-37, January.
  34. Kristian Orsini, 2006. "Is Belgium 'making work pay'?," Center for Economic Studies - Discussion papers, Katholieke Universiteit Leuven, Centrum voor Economische Studiën ces0605, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  35. Diamond, P., 1980. "Income taxation with fixed hours of work," Journal of Public Economics, Elsevier, Elsevier, vol. 13(1), pages 101-110, February.
  36. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," OECD Social, Employment and Migration Working Papers 28, OECD Publishing.
  37. Robert A. Moffitt & John Karl Scholz, 2009. "Trends in the Level and Distribution of Income Support," NBER Working Papers 15488, National Bureau of Economic Research, Inc.
  38. Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, Elsevier, vol. 6(1), pages 95-118, March.
  39. Bradley T. Heim, 2009. "Structural Estimation of Family Labor Supply with Taxes: Estimating a Continuous Hours Model Using a Direct Utility Specification," Journal of Human Resources, University of Wisconsin Press, vol. 44(2).
  40. Corneo, Giacomo & Gruner, Hans Peter, 2002. "Individual preferences for political redistribution," Journal of Public Economics, Elsevier, Elsevier, vol. 83(1), pages 83-107, January.
  41. Robert A. Moffitt, 2003. "Means-Tested Transfer Programs in the United States," NBER Books, National Bureau of Economic Research, Inc, number moff03-1, July.
  42. Blundell, Richard & Shephard, Andrew, 2011. "Employment, Hours of Work and the Optimal Taxation of Low Income Families," IZA Discussion Papers 5745, Institute for the Study of Labor (IZA).
  43. Immervoll, Herwig, 2007. "Minimum Wages, Minimum Labour Costs and the Tax Treatment of Low-Wage Employment," IZA Discussion Papers 2555, Institute for the Study of Labor (IZA).
  44. Grosfeld, Irena & Senik, Claudia, 2010. "The emerging aversion to inequality - Evidence from subjective data," CEPREMAP Working Papers (Docweb), CEPREMAP 1006, CEPREMAP.
  45. Chone, Philippe & Laroque, Guy, 2005. "Optimal incentives for labor force participation," Journal of Public Economics, Elsevier, Elsevier, vol. 89(2-3), pages 395-425, February.
  46. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  47. Irena Grosfeld & Claudia Senik, 2010. "The emerging aversion to inequality," The Economics of Transition, The European Bank for Reconstruction and Development, The European Bank for Reconstruction and Development, vol. 18(1), pages 1-26, 01.
  48. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  49. Sutherland, Holly, 2001. "EUROMOD: an integrated European benefit-tax model: final report," EUROMOD Working Papers EM9/01, EUROMOD at the Institute for Social and Economic Research.
  50. Isaksson, Ann-Sofie & Lindskog, Annika, 2009. "Preferences for redistribution--A country comparison of fairness judgements," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 72(3), pages 884-902, December.
  51. Olivier Bargain & Marco Caliendo & Peter Haan & Kristian Orsini, 2010. "“Making work pay” in a rationed labor market," Journal of Population Economics, Springer, Springer, vol. 23(1), pages 323-351, January.
  52. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
  53. M. Weeks, 2003. "Discrete choice methods with simulation, Kenneth E. Train, Cambridge University Press, 2003, ISBN: 0-521-81696-3, pp. 334," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(3), pages 379-383.
  54. Olivier Bargain & Amedeo Spadaro, 2008. "Optimal Taxation, Social Contract and the Four Worlds of Welfare Capitalism," Working Papers, School Of Economics, University College Dublin 200816, School Of Economics, University College Dublin.
  55. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  56. Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
  57. Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 116-21, May.
  58. Peter Haan & Viktor Steiner, 2005. "Labor Market Effects of the German Tax Reform 2000," Discussion Papers of DIW Berlin 472, DIW Berlin, German Institute for Economic Research.
  59. Alberto F. Alesina & Paola Giuliano, 2009. "Preferences for Redistribution," NBER Working Papers 14825, National Bureau of Economic Research, Inc.
  60. Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, Elsevier, vol. 88(9-10), pages 1931-1958, August.
  61. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, Springer, vol. 156(1), pages 25-43, March.
  62. Kelly Bishop & Bradley Heim & Kata Mihaly, 2009. "Single Women's Labor Supply Elasticities: Trends and Policy Implications," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(1), pages 146, October.
  63. Richard Blundell & Mike Brewer & Peter Haan & Andrew Shephard, 2009. "Optimal Income Taxation of Lone Mothers: An Empirical Comparison of the UK and Germany," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 119(535), pages F101-F121, 02.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Felix Bierbrauer & Pierre C. Boyer, 2014. "Efficiency, Welfare, and Political Competition," CESifo Working Paper Series 4814, CESifo Group Munich.
  2. Normann Lorenz & Dominik Sachs, 2012. "Optimal Participation Taxes and Efficient Transfer Phase-Out," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2012-37, Department of Economics, University of Konstanz.
  3. Benjamin B. Lockwood & Matthew Weinzierl, 2014. "Positive and Normative Judgments Implicit in U.S. Tax Policy, and the Costs of Unequal Growth and Recessions," Harvard Business School Working Papers, Harvard Business School 14-119, Harvard Business School.
  4. Gordon, Roger H. & Cullen, Julie Berry, 2012. "Income redistribution in a Federal system of governments," Journal of Public Economics, Elsevier, Elsevier, vol. 96(11), pages 1100-1109.
  5. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, Interational Microsimulation Association, vol. 1(6), pages 4-26.
  6. Bönke, Timm & Eichfelder, Sebastian & Utz, Stephen, 2012. "Uneven treatment of family life? Horizontal equity in the U.S. tax and transfer system," Discussion Papers 2012/18, Free University Berlin, School of Business & Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ese:emodwp:em2-11. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Groves).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.