Unemployment and Inactivity Traps in the Czech Republic: Incentive Effects of Policies
We investigate to what extent high net replacement rates between non-work and work household income may distort work incentives. Using a microsimulation model, we find that net replacement rates are particularly high for households with a working partner and children. While net replacement rates decreased moderately between 1996 and 2006 as wages rose faster than social benefits, the incidence of unemployment traps remains high. In particular, about a third of all employed individuals have a low incentive to avoid short spells of unemployment with the unemployment benefits provided, while unemployment traps are also widespread among the unemployed. The incidence of unemployment traps increased further in 2007 despite a reform of benefits. In particular, housing benefit, which was overhauled to reflect housing costs, increases net replacement rates, distorting work incentives particularly among households with children. In addition, the rise in parental allowance may lock eligible individuals in non-employment, increasing the loss of human capital among non-working parents. This is particularly important for single parents, who face the highest specific unemployment rate, and also long unemployment spells among all household types. While the link between net replacement rates and labour market stocks and flows is not straightforward across household types, further research should focus on the labour market behaviour of particular household types.
|Date of creation:||Dec 2007|
|Contact details of provider:|| Postal: Na Prikope 28, 115 03 Prague 1|
Phone: 00420 2 2442 1111
Fax: 00420 2 2421 8522
Web page: http://www.cnb.cz/en/research/research_intro/
More information through EDIRC
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.:
- Sorm, Vit & Terrell, Katherine, 2000.
"Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic,"
Journal of Comparative Economics,
Elsevier, vol. 28(3), pages 431-455, September.
- Vit Sorm & Katherine Terrell, 1999. "Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic," William Davidson Institute Working Papers Series 273, William Davidson Institute at the University of Michigan.
- Sorm, Vit & Terrell, Katherine, 2000. "Sectoral Restructuring and Labor Mobility: A Comparative Look at the Czech Republic," IZA Discussion Papers 111, Institute for the Study of Labor (IZA).
- Pedersen, Peder J. & Smith, Nina, 2001. "Unemployment Traps: Do Financial Disincentives Matter?," IZA Discussion Papers 274, Institute for the Study of Labor (IZA).
- Pedersen, Peder J. & Smith, Nina, 2002. "Unemployment Traps: Do Financial Dis-incentives matter?," CLS Working Papers 01-1, University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research.
- Ondřej Schneider, 2004. ": Who Pays Taxes and Who Gets Benefits in the Czech Republic," Working Papers IES 68, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2004.
- Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
- Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
- Stepan Jurajda & Daniel M??nich, 2002. "Understanding Czech Long-Term Unemployment," William Davidson Institute Working Papers Series 498, William Davidson Institute at the University of Michigan.
- Chiara Bronchi & Andrew Burns, 2001. "The Tax System in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 51(12), pages 618-638, December.
- Chiara Bronchi & Andrew Burns, 2000. "The Tax System in the Czech Republic," OECD Economics Department Working Papers 245, OECD Publishing.
- Kamil Galuscak & Daniel Munich, 2005. "Structural and Cyclical Unemployment: What Can We Derive from the Matching Function?," Working Papers 2005/02, Czech National Bank, Research Department.
- Tomáš Jelínek & Ondøej Schneider, 2001. "Czech Social Security and Tax System and Their Impact on the Income Distribution," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 51(12), pages 639-657, December.
- 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.
- Herwig Immervoll, 2003. "The Distribution Of Average And Marginal Effective Tax Rates In European Union Member States," Public Economics 0302005, EconWPA.
- Tito Boeri & Katherine Terrell, 2001. "Institutional Determinants of Labor Reallocation in Transition," William Davidson Institute Working Papers Series 384, William Davidson Institute at the University of Michigan.
- Giuseppe Carone & Herwig Immervoll & Dominique Paturot & Aino Salomäki, 2004. "Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes," OECD Social, Employment and Migration Working Papers 18, OECD Publishing. Full references (including those not matched with items on IDEAS)