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In-Work Benefits and Unemployment

Author

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  • Tonin, Mirco

    (Free University of Bozen/Bolzano)

  • Kolm, Ann-Sofie

    (Stockholm University)

Abstract

In-work benefits are becoming an increasingly relevant labour market policy, gradually expanding in scope and geographical coverage. This paper investigates the equilibrium impact of in-work benefits and contrasts it with the traditional partial equilibrium analysis. We find under which conditions accounting for equilibrium wage adjustments amplifies the impact of in-work benefits on search intensity, participation, employment, and unemployment, compared to a framework in which wages are fixed. We also account for the financing of these benefits and determine the level of benefits necessary to achieve efficiency in a labour market characterized by search externalities.

Suggested Citation

  • Tonin, Mirco & Kolm, Ann-Sofie, 2011. "In-Work Benefits and Unemployment," IZA Discussion Papers 5473, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5473
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    References listed on IDEAS

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    Cited by:

    1. Haywood, Luke & Neumann, Michael, 2021. "Equilibrium effects of tax exemptions for low pay," Labour Economics, Elsevier, vol. 69(C).
    2. Ann-Sofie Kolm & Mirco Tonin, 2012. "In-Work Benefits and the Nordic Model," CEU Working Papers 2013_1, Department of Economics, Central European University, revised 14 Dec 2012.
    3. Kolm, Ann-Sofie & Tonin, Mirco, 2015. "Benefits conditional on work and the Nordic model," Journal of Public Economics, Elsevier, vol. 127(C), pages 115-126.
    4. Edmark, Karin & Liang, Che-Yuan & Mörk, Eva & Selin, Håkan, 2012. "Evaluation of the Swedish earned income tax credit," Working Paper Series, Center for Fiscal Studies 2012:2, Uppsala University, Department of Economics.
    5. Gabriela Galassi, 2021. "Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform," Staff Working Papers 21-15, Bank of Canada.
    6. Ranđelović Saša & Žarković Rakić Jelena & Vladisavljević Marko & Vujić Sunčica, 2019. "Labour Supply and Inequality Effects of In-Work Benefits: Evidence from Serbia," Naše gospodarstvo/Our economy, Sciendo, vol. 65(3), pages 1-22, September.
    7. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    8. Minoru Watanabe, 2023. "Capital income taxation and trade unions in an endogenous fertility model," Discussion Papers 2302, Graduate School of Economics, Kobe University.
    9. Galassi, Gabriela, 2021. "Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform," IZA Discussion Papers 14248, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    search; in-work benefits; labour force participation; wage adjustment;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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