IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Reinventing the Dutch tax-benefit system: exploring the frontier of the equity-efficiency trade-off

European governments aim to raise labour supply, cut unemployment and, at the same time, maintain social cohesion. Yet, economists have stressed the trade-off between these objectives. This paper reviews the key policy insights from optimal tax theory to identify options for reform in the tax-benefit system that can potentially improve the equity-efficiency trade-off. Using a comprehensive applied general equilibrium model, we then explore whether reforms along these lines in the actual Dutch tax-benefit system will raise employment without sacrificing equality. The analysis reveals that selective tax relief for elastic secondary earners and low-skilled workers have this potential. A flat income tax structure possibly combined with a negative income tax worsens the equity-efficiency trade-off.

(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.

File URL: http://hdl.handle.net/10.1007/s10797-007-9048-6
Download Restriction: Access to full text is restricted to subscribers.

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.

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 15 (2008)
Issue (Month): 1 (February)
Pages: 87-103

as
in new window

Handle: RePEc:kap:itaxpf:v:15:y:2008:i:1:p:87-103
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=102915

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.:

as in new window
  1. Seade, J. K., 1977. "On the shape of optimal tax schedules," Journal of Public Economics, Elsevier, vol. 7(2), pages 203-235, April.
  2. Emmanuel Saez, 2000. "Using Elasticities to Derive Optimal Income Tax Rates," NBER Working Papers 7628, National Bureau of Economic Research, Inc.
  3. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
  4. Michiel Evers & Ruud de Mooij & Daniel van Vuuren, 2005. "What explains the variation in estimates of labour supply elasticities?," CPB Discussion Paper 51, CPB Netherlands Bureau for Economic Policy Analysis.
  5. Patricia Apps & Ray Rees, 2007. "The Taxation of Couples," Discussion Papers 07/21, Department of Economics, University of York.
  6. Boone, J. & Bovenberg, A.L., 2004. "The optimal taxation of unskilled labor with job search and social assistance," Other publications TiSEM 23eaec1d-2ceb-483e-98a9-e, Tilburg University, School of Economics and Management.
  7. A. Lans Bovenberg & Johan J. Graafland & Ruud A. de Mooij, 1998. "Tax Reform and the Dutch Labor Market: An Applied General Equilibrium Approach," NBER Working Papers 6693, National Bureau of Economic Research, Inc.
  8. Diamond, P., 1994. "Optimal Income Taxation: An Exemple with a U-Shaped Pattern of Optimal Marginal Tax Rates," Working papers 94-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Emmanuel Saez, 2000. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," NBER Working Papers 7708, National Bureau of Economic Research, Inc.
  10. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2009. "The Optimal Income Taxation of Couples," Econometrica, Econometric Society, vol. 77(2), pages 537-560, 03.
  11. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  12. Ricardo Varsano & Kevin Kim & Michael Keen, 2006. "The "Flat Tax(es)"; Principles and Evidence," IMF Working Papers 06/218, International Monetary Fund.
  13. Edward C. Prescott, 2004. "Why do Americans work so much more than Europeans?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
  14. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May.
  15. Michael J. Boskin & Eytan Sheshinski, 1979. "Optimal Tax Treatment of the Family: Married Couples," NBER Working Papers 0368, National Bureau of Economic Research, Inc.
  16. Seade, Jesus, 1982. "On the Sign of the Optimum Marginal Income Tax," Review of Economic Studies, Wiley Blackwell, vol. 49(4), pages 637-43, October.
  17. 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.
  18. Graafland, Johan J & Lever, Marcel H C, 1996. "Internal and External Forces in Sectoral Wage Formation: Evidence from the Netherlands," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 241-52, May.
  19. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, March.
  20. Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
  21. Graafland, J.J. & Huizinga, F.H., 1998. "Taxes and benefits in a non-linear wage equation," MPRA Paper 21076, University Library of Munich, Germany.
  22. Peter Sørensen, 2007. "The theory of optimal taxation: what is the policy relevance?," International Tax and Public Finance, Springer, vol. 14(4), pages 383-406, August.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:kap:itaxpf:v:15:y:2008:i:1:p:87-103. 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: (Guenther Eichhorn)

or (Christopher F. Baum)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.