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Social welfare effects of tax-benefit reform under endogenous participation and unemployment

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  • Brigitte van Baalen
  • Tobias Müller

Abstract

This paper analyzes the effects of tax-benefit reforms in a framework integrating endogenous labor supply and unemployment. There is a discrete distribution of individuals’ productivities and labor supply decisions are limited to the participation decision. Unemployment is modeled in a search and matching framework with individual wage bargaining. We adopt an ordinal approach to social welfare comparisons and explore numerically various reform policies. For Switzerland, a participation income is shown to be an “uncontroversial” tax reform, improving social welfare according to any social welfare criterion displaying inequality aversion.

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Bibliographic Info

Paper provided by Institut d'Economie et Econométrie, Université de Genève in its series Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva with number 2005.03.

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Length: 40 pages
Date of creation: Feb 2005
Date of revision:
Handle: RePEc:gen:geneem:2005.03

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  14. Salanie, Bernard, 2002. "Optimal demogrants with imperfect tagging," Economics Letters, Elsevier, vol. 75(3), pages 319-324, May.
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  16. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers, Institute for Fiscal Studies W98/18, Institute for Fiscal Studies.
  17. 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, vol. 21(1), pages 75-103, March.
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