In-work policies in Europe: Killing two birds with one stone?
Earning an income is probably the best way of avoiding poverty and social exclusion, hence the recent trend of promoting employment through in-work transfers in OECD countries. Yet, the relative consensus on the need for `making work pay' policies is muddied by a number of concerns relative to the design of the reforms and the treatment of the family dimension. Using the integrated microsimulation of European tax-benefit systems EUROMOD, we simulate two types of in-work transfers. The first one is a purely individualized policy while the second is means-tested on family income, in the fashion of the British Working Family Tax Credit. Both reforms are built on the same cost basis (after behavioral responses) and simulated in three European countries which experience severe poverty traps, namely Finland, France and Germany. The potential labor supply responses to the reforms and the subsequent redistributive impacts are assessed for each country using a structural discrete-choice model. We compare how both reforms achieve poverty reduction and social inclusion (measured as the number of transitions into activity). All three countries present different initial conditions, including institutional environment, existing tax-benefit systems and distribution of incomes and wage rates/incomes. These sources of heterogeneity are exploited together with different labor supply sensitivities to explain the cross-country differences in the impact of the reforms.
(This abstract was borrowed from another version of this item.)
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Schnabel, Reinhold & Gürtzgen, Nicole & Boeters, Stefan, 2003.
"Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis,"
ZEW Discussion Papers
03-70, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Stefan Boeters & Reinhold Schnabel & Nicole Gürtzgen, 2006. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," German Economic Review, Verein für Socialpolitik, vol. 7, pages 363-388, November.
- Callan, T. & van Soest, A.H.O., 1994.
"Family labour supply and taxes in Ireland,"
1994-26, Tilburg University, Center for Economic Research.
- Immervoll, Herwig & O'Donoghue, Cathal, 2002.
"Welfare benefits and work incentives: an analysis of the distribution of net replacement rates in Europe using EUROMOD, a multi-country microsimulation model,"
EUROMOD Working Papers
EM4/01, EUROMOD at the Institute for Social and Economic Research.
- Herwig Immervoll & Cathal O'Donoghue, 2003. "Welfare Benefits and Work Incentives. An Analysis of the Distribution of Net Replacement Rates in Europe using EUROMOD, a Multi- Country Microsimulation Model," Labor and Demography 0302001, EconWPA.
- Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2005.
"Welfare Reform in European Countries: A Microsimulation Analysis,"
OECD Social, Employment and Migration Working Papers
28, OECD Publishing.
- Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, vol. 117(516), pages 1-44, 01.
- Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Saez, Emmanuel, 2005. "Welfare Reform in European Countries: A Microsimulation Analysis," IZA Discussion Papers 1810, Institute for the Study of Labor (IZA).
- Immervoll, Herwig & Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare Reform in European Countries: A Micro-Simulation Analysis," CEPR Discussion Papers 4324, C.E.P.R. Discussion Papers.
- Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare reform in European countries: a micro-simulation analysis," EUROMOD Working Papers EM1/04, EUROMOD at the Institute for Social and Economic Research.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Ilmakunnas, Seija & Pudney, Stephen, 1990. "A model of female labour supply in the presence of hours restrictions," Journal of Public Economics, Elsevier, vol. 41(2), pages 183-210, March.
- Herwig Immervoll, 2003.
"The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States,"
- Immervoll, Herwig, 2002. "The distribution of average and marginal effective tax rates in European Union Member States," EUROMOD Working Papers EM2/02, EUROMOD at the Institute for Social and Economic Research.
- Bonin, Holger & Kempe, Wolfram & Schneider, Hilmar, 2002. "Household Labor Supply Effects of Low-Wage Subsidies in Germany," IZA Discussion Papers 637, Institute for the Study of Labor (IZA).
- Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
- Petri Böckerman & Markus Jäntti, 2005. "Is Variation in Hours of Work Driven by Supply or Demand? Evidence from Finnish Manufacturing Industries," Labor and Demography 0505012, EconWPA.
- Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
- Amedeo spadaro, 2003.
"Micro-simulation and Normative Policy Evaluation: an Application to some EU Tax-Benefits System,"
DELTA Working Papers
2003-23, DELTA (Ecole normale supérieure).
- Amedeo Spadaro, 2005. "Micro-simulation and Normative Policy Evaluation: An Application to Some EU Tax Benefits Systems," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 7(4), pages 593-622, October.
- Richard Blundell & Thomas MaCurdy, 1998.
"Labour supply: a review of alternative approaches,"
IFS Working Papers
W98/18, Institute for Fiscal Studies.
- Pierre-André Chiappori & François Bourguignon, 1998. "Fiscalité et redistribution," Revue Française d'Économie, Programme National Persée, vol. 13(1), pages 3-64.
- Nada Eissa & Hilary Williamson Hoynes, 2000.
"The Earned Income Tax Credit and the Labor Supply of Married Couples,"
- N. Eissa & H. W. Hoynes, . "The Earned Income Tax Credit and the Labor Supply of Married Couples," Institute for Research on Poverty Discussion Papers 1194-99, University of Wisconsin Institute for Research on Poverty.
- Nada Eissa & Hilary Williamson Hoynes, 1998. "The Earned Income Tax Credit and the Labor Supply of Married Couples," NBER Working Papers 6856, National Bureau of Economic Research, Inc.
- Eissa, Nada & Hoynes, Hilary Williamson, 1999. "The Earned Income Tax Credit and the Labor Supply of Married Couples," Department of Economics, Working Paper Series qt1024b9z8, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Peter Haan & Viktor Steiner, 2004. "Distributional and Fiscal Effects of the German Tax Reform 2000: A Behavioral Microsimulation Analysis," Discussion Papers of DIW Berlin 419, DIW Berlin, German Institute for Economic Research.
- Bourguignon, F. & O'Donoghue, C. & Sastre-Descals, J. & Spadara, A. & Utili, F., 1997.
"Eur3: A Prototype European Tax-Benefit Model,"
Cambridge Working Papers in Economics
9723, Faculty of Economics, University of Cambridge.
- Gurgand, M. & Margolis, D., 2001.
"RMI et revenus du travail : une evaluation des gains financiers a l'emploi,"
Dossiers de recherche-
09, Centre d'etudes de l'emploi.
- Marc Gurgand & David Margolis, 2001. "RMI et revenus du travail : une évaluation des gains financiers à l'emploi," Économie et Statistique, Programme National Persée, vol. 346(1), pages 103-122.
- Ugo Colombino & Steinar Strøm & Rolf Aaberge, 2000. "Labor supply responses and welfare effects from replacing current tax rules by a flat tax: Empirical evidence from Italy, Norway and Sweden," Journal of Population Economics, Springer, vol. 13(4), pages 595-621.
- Olivier Bargain, 2004. "Aides au retour à l'emploi et activité des femmes en couple," Revue de l'OFCE, Presses de Sciences-Po, vol. 88(1), pages 59-87.
- Euwals, R.W. & van Soest, A.H.O., 1996.
"Desired and Actual Labour Supply of Unmarried Men and Women in the Netherlands,"
1996-23, Tilburg University, Center for Economic Research.
- Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, vol. 6(1), pages 95-118, March.
- Emmanuel Saez, 2002.
"Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(3), pages 1039-1073, August.
- Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
- Karen Christopher & Paula England & Sara McLanahan & Katherin Ross Phillips & Timothy M. Smeeding, 2000. "Gender Inequality in Poverty in Affluent Nations: The Role of Single Motherhood and the State," JCPR Working Papers 108, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Karen Christopher & Paula England & Sara McLanahan & Katherin Ross & Tim Smeeding, 2000. "Gender Inequality in Poverty in Affluent Nations: The Role of Single Motherhood and the State," Working Papers 976, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
- Olivier Bargain, 2007.
"On Modeling Household Labor Supply With Taxation,"
200711, School of Economics, University College Dublin.
- Bernard Salanié & Guy Laroque, 2000. "Une décomposition du non-emploi en France," Économie et Statistique, Programme National Persée, vol. 331(1), pages 47-66.
- Michele Pellizzari, 2004.
"Unemployment Duration and the Interactions Between Unemployment Insurance and Social Assistance,"
272, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Pellizzari, Michele, 2006. "Unemployment duration and the interactions between unemployment insurance and social assistance," Labour Economics, Elsevier, vol. 13(6), pages 773-798, December.
- Hoynes, Hilary Williamson, 1996.
"Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP,"
Econometric Society, vol. 64(2), pages 295-332, March.
- Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
- Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
- Callan, T. & Dex, S. & Smith, N. & Vlasblom, J.D., 1999. "Taxation of Spouses: a Cross-Country Study of the Effects on Maaried Women's Labour Supply," Papers 99-02, Centre for Labour Market and Social Research, Danmark-.
- Mantovani, Daniela & Sutherland, Holly, 2003. "Social indicators and other income statistics using the EUROMOD baseline: a comparison with Eurostat and National Statistics," EUROMOD Working Papers EM1/03, EUROMOD at the Institute for Social and Economic Research.
- Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
- van Soest, A.H.O. & Das, J.W.M., 2000.
"Family Labor Supply and Proposed Tax Reforms in the Netherlands,"
2000-20, Tilburg University, Center for Economic Research.
- van Soest, A.H.O. & Das, J.W.M., 2000. "Family labor supply and proposed tax reforms in the Netherlands," Other publications TiSEM 57d9aef0-cc35-4fb2-9be2-d, Tilburg University, School of Economics and Management.
- Duncan, Alan & Giles, Christopher, 1996. "Labour Supply Incentives and Recent Family Credit Reforms," Economic Journal, Royal Economic Society, vol. 106(434), pages 142-55, January.
- Moffitt, Robert, 1984. "The Estimation of a Joint Wage-Hours Labor Supply Model," Journal of Labor Economics, University of Chicago Press, vol. 2(4), pages 550-66, October.
- Andrea Bassanini & Jørn Henrik Rasmussen & Stefano Scarpetta, 1999. "The Economic Effects of Employment-Conditional Income Support Schemes for the Low-Paid: An Illustration from a CGE Model Applied to Four OECD Countries," OECD Economics Department Working Papers 224, OECD Publishing.
- Atkinson, A. B. & Bouguignon, F. & Chiappori, P. A., 1988. "What do we learn about tax reform from international comparisons? France and Britain," European Economic Review, Elsevier, vol. 32(2-3), pages 343-352, March.
- Heckman, James J, 1993. "What Has Been Learned about Labor Supply in the Past Twenty Years?," American Economic Review, American Economic Association, vol. 83(2), pages 116-21, May.
- Peter Haan, 2004. "Discrete Choice Labor Supply: Conditional Logit vs. Random Coefficient Models," Discussion Papers of DIW Berlin 394, DIW Berlin, German Institute for Economic Research.
- Daniel McFadden & Kenneth Train, 2000. "Mixed MNL models for discrete response," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 15(5), pages 447-470.
- François Bourguignon & Thierry Magnac, 1990. "Labor Supply and Taxation in France," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 358-389.
- Philippe Choné & David le Blanc & Isabelle Robert-Bobée, 2003. "Female Labor Supply and Child Care in France," CESifo Working Paper Series 1059, CESifo Group Munich.
When requesting a correction, please mention this item's handle: RePEc:eee:labeco:v:13:y:2006:i:6:p:667-697. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.