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In Work Policies In Europe: Killing Two Birds With One Stone? Author info | Abstract | Publisher info | Download info | Related research | Statistics Bargain O
Orsini K
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Earning an income is probably the best way to avoid poverty and social exclusion, hence the recent trend of promoting employment through in-work transfers in OECD countries. Yet, the relative consensus on the need for ëmaking work payà policies is muddied by a number of concerns relative to the design of the reforms and the treatment of the family dimension. Relying on EUROMOD, a EU-15 integrated tax-benefit microsimulation software, we simulate two types of in-work benefits. The first one is means-tested on family income, in the fashion of the British Working Family Tax Credit, while the second is a purely individualized low wage subsidy. Both reforms are built on the same cost basis (after behavioral responses) and simulated in three European countries which experience severe poverty traps, namely Finland, France and Germany. The potential labor supply responses to the reforms and the subsequent redistributive impacts are assessed for each country using a structural discrete-choice model. We compare how both reforms achieve poverty reduction and social inclusion (measured as the number of transitions into activity). All three countries present different initial conditions, including institutional environment, existing tax-benefit systems and distribution of incomes and wages. These sources of heterogeneity are exploited together with different labor supply sensitivities to explain the cross-country differences in the impact of the reforms.
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Paper provided by EUROMOD at the Institute for Social and Economic Research in its series EUROMOD Working Papers with number
EM4/04.
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Date of creation: 01 Oct 2004Date of revision:
Handle: RePEc:ese:emodwp:em4/04Note: microsimulation, tax-benefit systems, in-work benefits, household labor supply, multinomial logit.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: http://www.iser.essex.ac.uk/research/euromod/ More information through EDIRC
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Keywords: microsimulation ; tax-benefit systems ; in-work benefits ; household labor supply ; multinomial logit. ; Other versions of this item:
Find related papers by JEL classification: C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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