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”.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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:
Contact details of provider:
Web page: http://220.127.116.11
Net Replacement Rate; Unemployment Benefits; Work Incentives; European Union; Microsimulation;
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)
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.:
- repec:ese:emodwp:em0-99 is not listed on IDEAS
- Aino Salom�ki & Teresa Munzi, 1999. "Net Replacement Rates of the Unemployed. Comparison of various approaches," European Economy - Economic Papers 133, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- Richard Layard & Stephen Nickell, 1998.
"Labour Market Institutions and Economic Performance,"
CEP Discussion Papers
dp0407, Centre for Economic Performance, LSE.
- Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
- Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
- Frédéric Berger & Monique Borsenberger & Herwig Immervoll & Julie Lumen & Bertrand Scholtus & Klaas DeVos, 2003. "The Impact Of Tax-Benefit Systems On Lowincome Households In The Benelux Countries. A Simulation Approach Using Synthetic Datasets," Microeconomics 0302003, EconWPA, revised 07 Feb 2003.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173, September.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, September.
- Tim Callan & Brian Nolan & Cathal O'Donoghue, 1996. "What Has Happened to Replacement Rates?," Papers WP076, Economic and Social Research Institute (ESRI).
- FitzRoy, Felix R & Hart, Robert A, 1985. "Hours, Layoffs and Unemployment Insurance Funding: Theory and Practice in an International Perspective," Economic Journal, Royal Economic Society, vol. 95(379), pages 700-713, September.
- Immervoll, H., 2000. "Fiscal Drag - An Automatic Stabiliser?," Cambridge Working Papers in Economics 0025, Faculty of Economics, University of Cambridge.
- David Carey & Harry Tchilinguirian, 2000. "Average Effective Tax Rates on Capital, Labour and Consumption," OECD Economics Department Working Papers 258, OECD Publishing.
- Snower, Dennis J., 1994.
"Evaluating Unemployment Policies: What do the Underlying Theories Tell Us?,"
CEPR Discussion Papers
1081, C.E.P.R. Discussion Papers.
- Snower, Dennis J, 1995. "Evaluating Unemployment Policies: What Do the Underlying Theories Tell Us?," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 110-35, Spring.
- Riphahn, Regina T., 2000. "Rational Poverty or Poor Rationality? The Take-up of Social Assistance Benefits," IZA Discussion Papers 124, Institute for the Study of Labor (IZA).
- Acemoglu, D. & Shimer, R., 1997.
"Efficient Unemployment Insurance,"
97-9, Massachusetts Institute of Technology (MIT), Department of Economics.
- repec:fth:eeccco:133 is not listed on IDEAS
- Heckman, James, 2013.
"Sample selection bias as a specification error,"
Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
- Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
- C Bean, 1992.
"European Unemployment: A Survey,"
CEP Discussion Papers
dp0071, Centre for Economic Performance, LSE.
- Herwig Immervoll & Cathal O'Donoghue, 2003. "Towards A Multi-Purpose Framework For Tax-Benefit Microsimulation," Computational Economics 0302002, EconWPA.
- Li, Jinjing & O'Donoghue, Cathal, 2011. "Incentives of Retirement Transition for Elderly Workers: An Analysis of Actual and Simulated Replacement Rates in Ireland," IZA Discussion Papers 5865, Institute for the Study of Labor (IZA).
- Bargain, Olivier & Orsini, Kristian, 2004.
"In-Work Policies in Europe: Killing Two Birds with One Stone?,"
IZA Discussion Papers
1445, Institute for the Study of Labor (IZA).
- Bargain, Olivier & Orsini, Kristian, 2006. "In-work policies in Europe: Killing two birds with one stone?," Labour Economics, Elsevier, vol. 13(6), pages 667-697, December.
- Olivier Bargain & Kristian Orsini, 2004. "In-work policies in Europe: killing two birds with one stone?," DELTA Working Papers 2004-13, DELTA (Ecole normale supérieure).
- repec:ese:emodwp:em4-04 is not listed on IDEAS
- repec:ese:emodwp:em6-07 is not listed on IDEAS
- Natascha Van Mechelen & Sarah Marchal & Tim Goedemé & Ive Marx & Bea Cantillon, 2011. "The CSB-Minimum Income Protection Indicators dataset (CSB-MIPI)," Working Papers 1105, Herman Deleeck Centre for Social Policy, University of Antwerp.
- Francesco Figari & Herwig Immervoll & Horacio Levy & Holly Sutherland, 2007.
"Inequalities within Couples: Market Incomes and the Role of Taxes and Benefits in Europe,"
SOEPpapers on Multidisciplinary Panel Data Research
74, DIW Berlin, The German Socio-Economic Panel (SOEP).
- Figari, Francesco & Immervoll, Herwig & Levy, Horacio & Sutherland, Holly, 2007. "Inequalities Within Couples: Market Incomes and the Role of Taxes and Benefits in Europe," IZA Discussion Papers 3201, Institute for the Study of Labor (IZA).
- repec:ese:iserwp:2007-28 is not listed on IDEAS
- repec:ese:emodwp:em6-08 is not listed on IDEAS
- repec:ese:emodwp:em1-04 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.