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Evaluation of Policy Options to Encourage Welfare to Work

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  • Hielke Buddelmeyer

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • John Freebairn

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

  • Guyonne Kalb

    ()
    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)

Abstract

This paper compares five alternative policy options with the January 2006 tax and social security system. Each option is designed to cost a similar amount of 5 billion dollars to the government at the current level of labour supply. The five options are: reducing the lowest income tax rate, increasing the tax-free threshold, increasing the low income tax offset, decreasing all taper rates on own and partner’s income for a number of allowances, and introducing an Earned Income Tax Credit. The criteria for comparison are the labour supply responses, the expected budgetary cost to the government after taking into account labour supply responses, the number of winners and losers from the policy change, the effects on the distribution of effective marginal tax rates, and the effect on the number of jobless households. From the results, it is clear that the option to reduce taper rates is dominated by the other options on all criteria. The other four options each have their advantages and disadvantages; no option scores best on all criteria.

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Bibliographic Info

Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2006n09.

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Length: 38 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:iae:iaewps:wp2006n09

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Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia
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  1. Guyonne Kalb & Rosanna Scutella & Hsein Kew, 2002. "Estimation of Wage Equations in Australia: Allowing for Censored Observations of Labour Supply," Melbourne Institute Working Paper Series wp2002n26, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  2. Productivity Commission, 2005. "Economic Implications of an Ageing Australia," Labor and Demography 0506001, EconWPA.
  3. Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
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Cited by:
  1. Rebecca Cassells & Ann Harding & Simon Kelly, 2006. "Problems and Prospects for Dynamic Microsimulation: A review and lessons for APPSIM," NATSEM Working Paper Series 63, University of Canberra, National Centre for Social and Economic Modelling.
  2. van Sonsbeek, Jan-Maarten, 2010. "Micro simulations on the effects of ageing-related policy measures," Economic Modelling, Elsevier, vol. 27(5), pages 968-979, September.
  3. Rachel Ong & Gavin Wood & Melek Cigdem, 2013. "Work incentives and decisions to remain in paid work in Australia," Bankwest Curtin Economics Centre Working Paper series WP1312, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.

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