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Work incentives at the bottom of the income distribution and for model families in Lithuania

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  • Navicke, Jekaterina
  • Lazutka, Romas

Abstract

The aim of this paper is to evaluate the impact of cash social benefits on work incentives at the bottom of the income distribution and among selected model family types in Lithuania. The analysis of the work incentives in Lithuania is carried out for the period of 2005-2013 based on a combination of measures estimated using tax-benefit microsimulation model EUROMOD and official OECD/EC indicators. The analysis revealed high disincentives to work at the bottom of the Lithuanian income distribution, dominated by the effect of cash social benefits compared to taxes or social insurance contributions. A strong trade-off between benefit adequacy and work incentives is built into the design of the Lithuanian cash benefit system, that of social assistance in particular. The challenge for policy design is thus to encourage and promote active labour market participation among low earners without eroding the minimum income protection floor.

Suggested Citation

  • Navicke, Jekaterina & Lazutka, Romas, 2015. "Work incentives at the bottom of the income distribution and for model families in Lithuania," EUROMOD Working Papers EM14/15, EUROMOD at the Institute for Social and Economic Research.
    • Handle: RePEc:ese:emodwp:em14-15
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    References listed on IDEAS

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    1. H. Xavier Jara & Alberto Tumino, 2013. "Tax-benefit systems, income distribution and work incentives in the European Union," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 27-62.
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    7. Bea Cantillon & Diego Collado & Natascha Van Mechelen, 2015. "The end of decent social protection for the poor? The dynamics of low wages, minimum income packages and median household incomes," Working Papers 1501, Herman Deleeck Centre for Social Policy, University of Antwerp.
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