Welfare Benefits and Work Incentives. An Analysis of the Distribution of Net Replacement Rates in Europe using EUROMOD, a Multi- Country Microsimulation Model
AbstractThis paper considers the methodology of measuring replacement rates, comparing simulation based approaches, which simulate replacement rates for a representative sample of the population, with other approaches that simulate replacement rates for "typical" families or are entirely based on recorded household data. We emphasise the advantages of the first method. Utilising a cross-country microsimulation model for Europe, EUROMOD, we generate the distribution of replacement rates for four European countries, Denmark, France, Spain and the UK. In particular we show the important role of household composition and the presence of other household members' incomes in preserving the standard of living while out of work. We argue that, given this strong influence of primary incomes, replacement rates are not necessarily the best indicator of the impact of the taxbenefit system in this respect. To isolate the effects of the tax-benefit system on both work incentives and the degree of social protection for the out-of-work population, we therefore introduce a new measure, the “tax-benefit-to-earnings ratio”.
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Bibliographic InfoPaper provided by EconWPA in its series Labor and Demography with number 0302001.
Date of creation: 07 Feb 2003
Date of revision:
Note: Type of Document - ; figures: included. EUROMOD web-site:
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Web page: http://188.8.131.52
Net Replacement Rate; Unemployment Benefits; Work Incentives; European Union; Microsimulation;
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Find related papers by JEL classification:
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-02-10 (All new papers)
- NEP-CMP-2003-02-10 (Computational Economics)
- NEP-EEC-2003-02-10 (European Economics)
- NEP-MAC-2003-02-10 (Macroeconomics)
- NEP-PKE-2003-02-10 (Post Keynesian Economics)
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