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Differential Welfare State Impacts for Frontier Working Age Families

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  • Burlacu, Irina S.

    () (Maastricht University)

  • O'Donoghue, Cathal

    () (Maastricht University)

Abstract

Benefits and taxes vary greatly across the European Union owing to incongruent welfare and taxation systems. This paper analyzes how welfare states achieve insurance and equity objectives for residents who work in other countries. The aim is to evaluate the impact of unemployment benefits and income taxation on these frontier workers' welfare in Luxembourg and Belgium that exhibit similar welfare state objectives. The analysis is based on social security coordination Regulation 883/2004 provisions on unemployment, taxation regimes and bi-lateral tax treaties. We find mixed results. First, while countries follow analogous welfare regimes and pursue similar welfare objectives, their ensuing outputs differ significantly. Second, differences in unemployment conditions and benefits favor high discrepancies in residents' incomes. Third, mobility creates high vertical and horizontal inequity among Belgian and Luxembourgish residents.

Suggested Citation

  • Burlacu, Irina S. & O'Donoghue, Cathal, 2012. "Differential Welfare State Impacts for Frontier Working Age Families," IZA Discussion Papers 6734, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6734
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    References listed on IDEAS

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    1. Immervoll, Herwig & O'Donoghue, Cathal, 2002. "Welfare benefits and work incentives: an analysis of the distribution of net replacement rates in Europe using EUROMOD, a multi-country microsimulation model," EUROMOD Working Papers EM4/01, EUROMOD at the Institute for Social and Economic Research.
    2. Brenner, Neil, 2004. "New State Spaces: Urban Governance and the Rescaling of Statehood," OUP Catalogue, Oxford University Press, number 9780199270064.
    3. O'Donoghue, Cathal & Sutherland, Holly, 1999. "Accounting for the Family in European Income Tax Systems," Cambridge Journal of Economics, Oxford University Press, vol. 23(5), pages 565-598, September.
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    5. Atkinson, A.B. & Bourguignon, Francois & O'Donoghue, Cathal & Sutherland, Holly & Utili, F., 1999. "Microsimulation and the formulation of policy: a case study of targeting in the European Union," EUROMOD Working Papers EM2/99, EUROMOD at the Institute for Social and Economic Research.
    6. Barr, Nicholas, 2004. "Economics of the Welfare State," OUP Catalogue, Oxford University Press, edition 4, number 9780199264971.
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    10. Pierrard, Olivier, 2008. "Commuters, residents and job competition," Regional Science and Urban Economics, Elsevier, vol. 38(6), pages 565-577, November.
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    12. Buhmann, Brigitte, et al, 1988. "Equivalence Scales, Well-Being, Inequality, and Poverty: Sensitivity Estimates across Ten Countries Using the Luxembourg Income Study (LIS) Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 34(2), pages 115-142, June.
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    More about this item

    Keywords

    frontier workers; social policy; policy coordination;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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