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In-Work Tax Credits in Belgium :An Analysis of the Jobkorting Using a Discrete Labour Supply Model

Author

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  • André Decoster
  • Pieter Vanleenhove

Abstract

The Flemish government implemented in 2007 an in-work tax credit in order to increase theemployment rate and to make working financially more attractive. This paper investigates howtotal labour supply changes and checks if the cost reductions due to these behavioral reactionsare large enough to defend such expensive policies. It appears that married women alter theirlabour supply decision the most. However, due to the small tax credit, total labour supplyeffects are of minor size and hardly offset the large costs. Only a more generous tax credit leadsto a higher activations of inactive people, however the budgetary cost is huge.

Suggested Citation

  • André Decoster & Pieter Vanleenhove, 2012. "In-Work Tax Credits in Belgium :An Analysis of the Jobkorting Using a Discrete Labour Supply Model," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(2), pages 121-150.
  • Handle: RePEc:bxr:bxrceb:2013/143387
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vanleenhove, Pieter, 2013. "Full childcare coverage: higher maternal labour supply and childcare usage?," EUROMOD Working Papers EM19/13, EUROMOD at the Institute for Social and Economic Research.
    2. Diego Collado, 2018. "Financial work incentives and the long-term unemployed: the case of Belgium," Working Papers 1803, Herman Deleeck Centre for Social Policy, University of Antwerp.
    3. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    4. André Decoster & Xavier Flawinne & Pieter Vanleenhove, 2014. "Generational accounts for Belgium: fiscal sustainability at a glance," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(4), pages 663-686, November.

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    More about this item

    Keywords

    Public economics; Taxation; Labour supply; Discrete choice;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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