IDEAS home Printed from https://ideas.repec.org/p/cir/cirwor/2015s-28.html
   My bibliography  Save this paper

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

Author

Listed:
  • Samir Amine
  • Pedro Lages Dos Santos

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, 2015. "Negative Income Tax and Labor Market Participation: A Short Run Analysis," CIRANO Working Papers 2015s-28, CIRANO.
    • Handle: RePEc:cir:cirwor:2015s-28
    as

    Download full text from publisher

    File URL: https://cirano.qc.ca/files/publications/2015s-28.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Pietro Garibaldi & Etienne Wasmer, 2003. "Equilibrium Employment in a Model of Imperfect Labour Market," Sciences Po publications info:hdl:2441/9024, Sciences Po.
    3. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    4. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-291, April.
    5. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    6. repec:hal:spmain:info:hdl:2441/9024 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lages Dos Santos, Pedro, 2008. "Impôt négatif, salaire minimum et chômage dans un modèle d’appariement avec différenciation des agents," L'Actualité Economique, Société Canadienne de Science Economique, vol. 84(1), pages 47-70, mars.
    2. Julie Beugnot & Olivier Charlot & Guy Lacroix, 2019. "Does promoting homeownership always damage labour market performances?," Journal of Economics, Springer, vol. 127(2), pages 161-183, July.
    3. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, vol. 51(8), pages 1859-1895, November.
    4. Gavrel, Frédéric & Lebon, Isabelle, 2009. "Endogenous job specialization," Economic Modelling, Elsevier, vol. 26(2), pages 328-334, March.
    5. Gautier, Pieter A. & Zenou, Yves, 2010. "Car ownership and the labor market of ethnic minorities," Journal of Urban Economics, Elsevier, vol. 67(3), pages 392-403, May.
    6. Tomer Blumkin & Leif Danziger & Eran Yashiv, 2017. "Optimal unemployment benefit policy and the firm productivity distribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(1), pages 36-59, February.
    7. Guillaume Wilemme, 2021. "Optimal Taxation to Correct Job Mismatching," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 170-197, April.
    8. Fuller, David L. & Kudlyak, Marianna & Lkhagvasuren, Damba, 2014. "Productivity insurance: The role of unemployment benefits in a multi-sector model," Journal of Economic Dynamics and Control, Elsevier, vol. 47(C), pages 39-53.
    9. Alain Delacroix & Etienne Wasmer, 2007. "Job and Workers Flows in Europe and the US: Specific Skills or Employment Protection?," Post-Print hal-01053160, HAL.
    10. Benjamin Lochner & Bastian Schulz, 2024. "Firm Productivity, Wages, and Sorting," Journal of Labor Economics, University of Chicago Press, vol. 42(1), pages 85-119.
    11. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.
    12. Lehmann, Etienne & Montero Ledezma, Paola L. & Linden, Bruno Van der, 2016. "Workforce location and equilibrium unemployment in a duocentric economy with matching frictions," Journal of Urban Economics, Elsevier, vol. 91(C), pages 26-44.
    13. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2010. "Wages, selectivity, and vacancies: Evaluating the short-term and long-term impact of the minimum wage on unemployment," Economic Modelling, Elsevier, vol. 27(5), pages 1274-1281, September.
    14. Tomer Blumkin & Yossi Hadar & Eran Yashiv, 2009. "The Macroeconomic Role of Unemployment Compensation," CEP Discussion Papers dp0909, Centre for Economic Performance, LSE.
    15. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.
    16. Lehmann, Etienne & Montero Ledezma, Paola L. & Van der Linden, Bruno, 2013. "Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions," IZA Discussion Papers 7828, Institute of Labor Economics (IZA).
    17. repec:hal:spmain:info:hdl:2441/9938 is not listed on IDEAS
    18. Samir Amine, 2013. "Improving Job-Worker Matching and Labour Market Performance," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 176-189.
    19. Coen N. Teulings & Pieter A. Gautier, 2004. "The Right Man for the Job," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(2), pages 553-580.
    20. Van Ommeren, Jos & Rietveld, Piet, 2005. "The commuting time paradox," Journal of Urban Economics, Elsevier, vol. 58(3), pages 437-454, November.
    21. Sengul, Gonul, 2017. "Effect of labor market policies on unemployment when firms adapt their recruitment strategy," Economic Modelling, Elsevier, vol. 60(C), pages 169-179.

    More about this item

    Keywords

    Matching; participation; negative income tax.;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2015s-28. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/ciranca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.