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Negative Income Tax and Labor Market Participation. A Short Run Analysis

Author

Listed:
  • Samir AMINE

    (Université du Quebèc en Outaouais and CIRANO, Canada)

  • Pedro LAGES DOS SANTOS

    (University of Le Havre, France)

Abstract

This article examines the effects of the negative income tax, in a matching model, on labor market participation. We show that the introduction of such instrument reduces unemployment and improves the situation of the poorest. But, amazingly, it provokes a fall on labor market participation principally because the agents are then less selective. We find another surprising result: despite the rise on participation, the increasing of unemployment benefits improves the situation of the firms at the expense of workers.

Suggested Citation

  • Samir AMINE & Pedro LAGES DOS SANTOS, 2012. "Negative Income Tax and Labor Market Participation. A Short Run Analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(566)), pages 41-56, January.
    • Handle: RePEc:agr:journl:v:1(566):y:2012:i:1(566):p:41-56
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