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Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes

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  • Giuseppe Carone
  • Herwig Immervoll
  • Dominique Paturot
  • Aino Salomäki

Abstract

This paper presents results from an on-going joint European Commission / OECD project, aimed at monitoring the direct influence of tax and benefit instruments on household incomes. The project uses and extends OECD tax-benefit models to compute a range of work incentive indicators such as marginal effective tax rates on earned income. This paper provides a methodological background describing these extensions. It also discusses the usefulness of a range of indicators such as net replacement rates and marginal effective tax rates and to what extent they can be used to quantify possible work disincentives. The approaches are illustrated using detailed tax-benefit calculations for 2001 and comparing relevant indicators across 15 EU and 8 non-EU countries. The results presented in this paper permit the identification of family circumstances where (1) financial incentives to increase work are either small or missing altogether; or (2) resources provided by social transfers may be ... Cette étude présente les résultats d’un projet commun Commission européenne/OCDE qui vise à faire apparaître l’impact direct des mécanismes fiscaux et de prestations sur le revenu des ménages. Le projet utilise, en les élargissant, les modèles fiscalité-prestations de l’OCDE pour calculer divers indicateurs de l’incitation à l’activité tels que le taux marginal effectif d’imposition des revenus du travail. Cette étude donne, par ailleurs, des indications méthodologiques sur la façon dont il a été procédé. On examine aussi la pertinence de différents indicateurs tels que le taux de remplacement net et le taux marginal effectif d’imposition, et on cherche à voir dans quelle mesure ils peuvent permettre de mesurer d’éventuels effets décincitatifs vis-à-vis de l’activité. A des fins d’illustration, on présente des calculs détaillés impôts-prestations pour 2001 et on procède à des comparaisons d’indicateurs pertinents dans les 15 pays de l’UE et 8 pays non membres de ...

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Social, Employment and Migration Working Papers with number 18.

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Date of creation: 15 Mar 2004
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Handle: RePEc:oec:elsaab:18-en

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Cited by:
  1. Philippe Egoumé-Bossogo & Anita Tuladhar, 2006. "Tax, Welfare, and Pension Reforms in Slovenia," IMF Working Papers 06/298, International Monetary Fund.
  2. Kamila Fialová & Martina Mysíková, 2009. "Labour Market Participation: The Impact of Social Benefits in the Czech Republic and Selected European Countries," Prague Economic Papers, University of Economics, Prague, vol. 2009(3), pages 235-250.
  3. Luigi, Bernardi, 2011. "Economic crisis and taxation in Europe," MPRA Paper 31007, University Library of Munich, Germany.
  4. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What Have We Learned? Assessing Labor Market Institutions and Indicators," IZA Discussion Papers 3470, Institute for the Study of Labor (IZA).
  5. Kamil Galuscak & Jan Pavel, 2007. "Unemployment and Inactivity Traps in the Czech Republic: Incentive Effects of Policies," Working Papers 2007/9, Czech National Bank, Research Department.
  6. Kamil Galuscak & Jan Pavel, 2012. "Taxes and Benefits: Work Incentive Effects of Policies," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 62(1), pages 27-43, February.
  7. Angelo Marano & Carlo Mazzaferro & Marcello Morciano, 2012. "The strengths and failures of incentive mechanisms in notional defined contribution pension systems," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 71(1), pages 33-70, October.
  8. Andreas Knabe & Ronnie Schöb, 2007. "Subsidizing Extra Jobs: Promoting Employment by Taming the Unions," FEMM Working Papers 07020, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
  9. Jara Tamayo, Holguer Xavier & Tumino, Alberto, 2013. "Tax-benefit systems, income distribution and work incentives in the European Union," EUROMOD Working Papers EM7/13, EUROMOD at the Institute for Social and Economic Research.
  10. H. Xavier Jara & Alberto Tumino, 2013. "Tax-benefit systems, income distribution and work incentives in the European Union," International Journal of Microsimulation, Interational Microsimulation Association, vol. 1(6), pages 27-62.
  11. European Commission, 2010. "Tax Policy after the Crisis: Monitoring Tax Revenues and Tax Reforms in EU Member States 2010 Report," Taxation Papers 24, Directorate General Taxation and Customs Union, European Commission.
  12. Primoz Dolenc & Milan Vodopivec, 2005. "Does work pay in Slovenia?," Financial Theory and Practice, Institute of Public Finance, vol. 29(4), pages 341-362.
  13. Andreas Bergh, 2006. "Is the Swedish Welfare State A Free Lunch?," Econ Journal Watch, Econ Journal Watch, vol. 3(2), pages 210-235, May.

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