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In-Work Benefits and the Nordic Model

Author Info

Listed author(s):
  • Kolm, Ann-Sofie

    ()

    (Dept. of Economics, Stockholm University)

  • Tonin, Mirco

    ()

    (University of Southampton (and Central European University, Budapest; IZA, Bonn))

Abstract

Welfare benefits in the Nordic countries are often tied to employment. We argue that this is one of the factors behind the success of the Nordic model, where a comprehensive welfare state is associated with high employment. In a general equilibrium setting, the underlining mechanism works through wage moderation and job creation. The benefits make it more important to hold a job, thus lower wages will be accepted, and more jobs created. Moreover, we show that the incentive to acquire higher education improves, further boosting employment in the long run. These positive effects help counteracting the negative impact of taxation.

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File URL: http://www2.ne.su.se/paper/wp13_01.pdf
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Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2013:1.

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Length: 30 pages
Date of creation: 10 Jan 2013
Handle: RePEc:hhs:sunrpe:2013_0001
Contact details of provider: Postal:
Department of Economics, Stockholm, S-106 91 Stockholm, Sweden

Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
Web page: http://www.ne.su.se/
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More information through EDIRC

Keywords: Nordic model; in-work benefits; wage adjustment; unemployment; education; skill formation; earnings;

Other versions of this item:

Find related papers by JEL classification:
  • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
  • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
  • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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References listed on IDEAS
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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
  2. Richard Rogerson, 2007. "Taxation and market work: is Scandinavia an outlier?," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 32(1), pages 59-85, July.
  3. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 1063-1114.
  4. Malul Miki & Luski Israel, 2009. "The Optimal Policy Combination of the Minimum Wage and the Earned Income Tax Credit," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-24, November.
  5. Ann-Sofie Kolm & Mirco Tonin, 2011. "In-work benefits and unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(1), pages 74-92, February.
  6. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-265, April.
  7. Havnes, Tarjei & Mogstad, Magne, 2011. "Money for nothing? Universal child care and maternal employment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1455-1465.
  8. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2003. "The Survival of the Welfare State," American Economic Review, American Economic Association, vol. 93(1), pages 87-112, March.
  9. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  10. Richard B. Freeman & Robert Topel & Birgitta Swedenborg, 1997. "The Welfare State in Transition: Reforming the Swedish Model," NBER Books, National Bureau of Economic Research, Inc, number free97-1, June.
  11. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 605-637.
  12. Leigh Andrew, 2010. "Who Benefits from the Earned Income Tax Credit? Incidence among Recipients, Coworkers and Firms," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-43, May.
  13. Ann-Sofie Kolm & Edward P. Lazear, 2010. "Policies Affecting Work Patterns and Labor Income for Women," NBER Chapters,in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 57-81 National Bureau of Economic Research, Inc.
  14. Jesse Rothstein, 2010. "Is the EITC as Good as an NIT? Conditional Cash Transfers and Tax Incidence," American Economic Journal: Economic Policy, American Economic Association, vol. 2(1), pages 177-208, February.
  15. Raj Chetty & John N. Friedman & Emmanuel Saez, 2013. "Using Differences in Knowledge across Neighborhoods to Uncover the Impacts of the EITC on Earnings," American Economic Review, American Economic Association, vol. 103(7), pages 2683-2721, December.
  16. Richard B. Freeman & Robert Topel & Birgitta Swedenborg, 1997. "Introduction to "The Welfare State in Transition: Reforming the Swedish Model"," NBER Chapters,in: The Welfare State in Transition: Reforming the Swedish Model, pages 1-32 National Bureau of Economic Research, Inc.
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