Housing Benefits and Monetary Incentives to Work: Simulations for France[Allocations logement et incitations financières au travail : simulations pour la France]

This paper characterizes the impact of housing benefits on monetary incentives to work in France both at the intensive and extensive margins. Effective marginal and participation tax rates are estimated using the 2011 enquête Revenus fiscaux et sociaux (ERFS, Insee) for employed childless singles with the TAXIPP microsimulation model and decomposed by tax and transfer instruments. Means-testing implies that a 1 euro increase in gross labor earnings reduces housing benefits by 27 cents on average. Combined with reductions in other meanstested transfers (30 cents) and the payment of social contributions (21 cents) this translates into effective marginal tax rates close to 80%. Means-testing also induces a reduction in housing benefits upon taking a job which acts as a participation tax. Its magnitude depends on whether individuals receive unemployment benefits when out-of-work. Unemployment benefits increase overall participation tax rates by providing higher replacement earnings but decrease the participation tax linked to housing benefits by reducing the amounts of housing benefits received.