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From Welfare to Work: Evaluating a Proposed Tax and Benefit Reform Targeted at Single Mothers in Sweden

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Author Info

  • Flood, Lennart

    ()
    (University of Gothenburg)

  • Pylkkänen, Elina

    ()
    (University of Gothenburg)

  • Wahlberg, Roger

    (University of Gothenburg)

Abstract

In this paper we propose a tax and benefit reform to increase the working hours and to decrease the welfare participation of single mothers in Sweden. We have access to highquality tax and income data, and use a detailed tax-benefit program to generate precise budget-sets. We formulate and estimate a structural, static model of labor supply and welfare participation. The results suggest that labor supply among single mother households in Sweden is quite elastic, and that there is self-selection into welfare. The proposed reform would generate welfare-gains for virtually everyone in the sample, yet would be revenue neutral.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 891.

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Length: 46 pages
Date of creation: Oct 2003
Date of revision:
Publication status: published in: Labour, 2007, 21 (3), 443-471
Handle: RePEc:iza:izadps:dp891

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Keywords: tax and benefit reform; single mothers; labor supply; welfare participation;

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References

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  1. 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).
  2. Blundell, Richard & Duncan, Alan & Meghir, Costas, 1992. "Taxation in Empirical Labour Supply Models: Lone Mothers in the UK," Economic Journal, Royal Economic Society, vol. 102(411), pages 265-78, March.
  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  4. Thomas MaCurdy & David Green & Harry Paarsch, 1990. "Assessing Empirical Approaches for Analyzing Taxes and Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 415-490.
  5. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
  6. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  7. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  8. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  9. Kapteyn, A.J. & Kooreman, P. & Soest, A.H.O. van, 1989. "Quantity rationing and concavity in a flexible household labor supply model," Discussion Paper 1989-16, Tilburg University, Center for Economic Research.
  10. Soest, A.H.O. van & Das, J.W.M., 2000. "Family labor supply and proposed tax reforms in the Netherlands," Open Access publications from Tilburg University urn:nbn:nl:ui:12-121735, Tilburg University.
  11. Bruce D. Meyer & Dan T. Rosenbaum, 2000. "Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects," NBER Working Papers 7491, National Bureau of Economic Research, Inc.
  12. Ian Walker & Ian Preston, 1999. "Welfare measurement in labour supply models with nonlinear budget constraints," Journal of Population Economics, Springer, vol. 12(3), pages 343-361.
  13. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "Evaluating In-Work Benefit Reform: The Working Families Tax Credit in the U.K," JCPR Working Papers 160, Northwestern University/University of Chicago Joint Center for Poverty Research.
  14. Meyer, Bruce D. & Rosenbaum, Dan T., 2000. "Making Single Mothers Work: Recent Tax and Welfare Policy and its Effects," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 1027-62, December .
  15. Graversen, E.K., 1996. "Male and Female labour Supply in Damark," Papers 96-15, Centre for Labour Market and Social Research, Danmark-.
  16. 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.
  17. repec:fth:stanho:e-90-11 is not listed on IDEAS
  18. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  19. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
  20. Deb, Partha & Trivedi, Pravin K, 1997. "Demand for Medical Care by the Elderly: A Finite Mixture Approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(3), pages 313-36, May-June.
  21. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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Citations

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Cited by:
  1. Ericson, Peter & Flood, Lennart & Wahlberg, Roger, 2009. "SWEtaxben: A Swedish Tax/benefit Micro Simulation Model and an Evaluation of a Swedish Tax Reform," Working Papers in Economics 346, University of Gothenburg, Department of Economics.
  2. Peter Ericson & Lennart Flood, 2012. "A Microsimulation Approach to an Optimal Swedish Income Tax," International Journal of Microsimulation, Interational Microsimulation Association, vol. 2(5), pages 2-21.
  3. Edmark, Karin & Liang, Che-Yuan & Mörk, Eva & Selin, Håkan, 2012. "An Evaluation of the Swedish Earned Income Tax Credit," Working Paper Series 901, Research Institute of Industrial Economics.
  4. Ericson, Peter & Flood, Lennart, 2011. "Taxes, Wages and Working Hours," Working Papers in Economics 514, University of Gothenburg, Department of Economics.
  5. Edmark, Karin & Liang, Che-Yuan & Mörk, Eva & Selin, Håkan, 2012. "Evaluation of the Swedish earned income tax credit," Working Paper Series, Center for Labor Studies 2012:3, Uppsala University, Department of Economics.
  6. Brink, Anna & Nordblom, Katarina & Wahlberg, Roger, 2007. "Maximum fee vs child benefit: A welfare analysis of Swedish child-care fee reform," Working Papers in Economics 250, University of Gothenburg, Department of Economics.
  7. Aaberge, Rolf & Flood, Lennart, 2008. "Evaluation of an In-Work Tax Credit Reform in Sweden: Effects on Labor Supply and Welfare Participation of Single Mothers," IZA Discussion Papers 3736, Institute for the Study of Labor (IZA).
  8. Gustafsson, Björn Anders, 2011. "Disparities in Social Assistance Receipt between Immigrants and Natives in Sweden," IZA Discussion Papers 6129, Institute for the Study of Labor (IZA).
  9. Ann-Sofie Kolm & Edward P. Lazear, 2010. "Policies Affecting Work Patterns and Labor Income for Women," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 57-81 National Bureau of Economic Research, Inc.
  10. Forslund, Anders, 2009. "Labour supply incentives, income support systems and taxes in Sweden," Working Paper Series 2009:30, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. Anna Brink & Katarina Nordblom & Roger Wahlberg, 2007. "Maximum fee versus child benefit: a welfare analysis of Swedish child-care fee reform," International Tax and Public Finance, Springer, vol. 14(4), pages 457-480, August.

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