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Social welfare effects of tax-benefit reform under endogenous participation and unemployment

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  • Brigitte van Baalen
  • Tobias Müller

Abstract

This paper analyzes the effects of tax-benefit reforms in a framework integrating endogenous labor supply and unemployment. There is a discrete distribution of individuals’ productivities and labor supply decisions are limited to the participation decision. Unemployment is modeled in a search and matching framework with individual wage bargaining. We adopt an ordinal approach to social welfare comparisons and explore numerically various reform policies. For Switzerland, a participation income is shown to be an “uncontroversial” tax reform, improving social welfare according to any social welfare criterion displaying inequality aversion.

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  • Brigitte van Baalen & Tobias Müller, 2005. "Social welfare effects of tax-benefit reform under endogenous participation and unemployment," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 2005.03, Institut d'Economie et Econométrie, Université de Genève.
  • Handle: RePEc:gen:geneem:2005.03
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