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Evaluation of an In-work Tax Credit Reform in Sweden: Effects on Labor Supply and Welfare Participation of Single Mothers

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Author Info
Aaberge, Rolf () (Research Department, Statistics Norway)
Flood, Lennart () (Department of Economics, School of Business, Economics and Law, Göteborg University)

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Abstract

The purpose of this paper is to evaluate a recent Swedish in-work tax credit reform where we pay particular attention to labor market exclusion; i.e. individuals in as well as outside the labor force are included in the analysis. To highlight the importance of the joint effects from the tax and the benefit systems it appears particular relevant to analyze the labor supply behavior of single mothers. To this end, we estimate a structural microeconometric model of labor supply and welfare participation. The model accounts for heterogeneity in consumption-leisure preferences as well as for constraints in job opportunities. The results of the evaluation show that the reform generates welfare-gains for virtually every single mother, and moreover benefits low-income households. Finally, due to increased labor supply and decline in welfare participation we find that this reform is almost self-financing.

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Publisher Info
Paper provided by Göteborg University, Department of Economics in its series Working Papers in Economics with number 319.

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Length: 42 pages
Date of creation: 30 Sep 2008
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Handle: RePEc:hhs:gunwpe:0319

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Postal: Department of Economics, School of Business, Economics and Law, Göteborg University Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research
Keywords: Labor supply; single mothers; in-work tax credit; social assistance; random utility model;

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Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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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.:
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    Other versions:
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  3. Lennart Flood & Jörgen Hansen & Roger Wahlberg, 2004. "Household Labor Supply and Welfare Participation in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 39(4). [Downloadable!] (restricted)
    Other versions:
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  6. 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, vol. 116(3), pages 1063-1114, August. [Downloadable!] (restricted)
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  7. Dagsvik, John K, 1994. "Discrete and Continuous Choice, Max-Stable Processes, and Independence from Irrelevant Attributes," Econometrica, Econometric Society, vol. 62(5), pages 1179-1205, September. [Downloadable!] (restricted)
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  14. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug.. [Downloadable!]
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  20. Ugo Colombino & Rolf Aaberge, 2006. "Designing Optimal Taxes with a Microeconometric Model of Household Labour Supply," CHILD Working Papers wp20_06, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY. [Downloadable!]
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  26. Hanming Fang & Michael P. Keane, 2004. "Assessing the Impact of Welfare Reform on Single Mothers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2004-1), pages 1-116. [Downloadable!]
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Full references

Cited by:
(explanations, 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.)

  1. Ericson, Peter & Flood, Lennart & Wahlberg, Roger, 2009. "SWEtaxben: A Swedish Tax/Benefit Micro Simulation Model and an Evaluation of a Swedish Tax Reform," IZA Discussion Papers 4106, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Bosch, Nicole & van der Klaauw, Bas, 2009. "Analyzing Female Labor Supply: Evidence from a Dutch Tax Reform," IZA Discussion Papers 4238, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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