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Recent reforms of the tax and benefit systems in the framework of flexicurity


  • Carone, Giuseppe
  • Stovicek, Klara
  • Pierini, Fabiana
  • Sail, Etienne


This paper provides an analysis of recent reforms of tax-benefit systems and a preliminary assessment of their impact on financial incentives to work and on labour supply. Many Member States have introduced policies to “make work pay” and have targeted low-wage workers with the aim of increasing their takehome pay. The labour market improvements observed over recent years are a sign that structural reforms have started to pay off. The reduction of disincentives to work and to hire, especially for the low-skilled, embedded in tax and benefit systems, a greater link with activation policies and a stronger reliance on preventive and targeted active labour market policies (ALMPs), and widespread wage moderation are all factors that have contributed to the structural improvement in the functioning of labour markets. Yet, despite these improvements, in view of the ageing of the population and rapid technological change, more progress is needed to further increase and maintain high levels of employment and participation rates, especially among female and older workers, and to reduce structural unemployment. Member States should continue along the line of reforms followed so far. The Commission has stressed the importance of a comprehensive strategy of labour market reforms ("flexicurity") that shift the focus from protection on the job to insurance in the market. These reforms would enable workers to move more smoothly from declining to expanding activities, thus easing tensions in the adjustment process, while ensuring adequate income support and responding to potential anxieties among European citizens.

Suggested Citation

  • Carone, Giuseppe & Stovicek, Klara & Pierini, Fabiana & Sail, Etienne, 2009. "Recent reforms of the tax and benefit systems in the framework of flexicurity," MPRA Paper 24862, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:24862

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    References listed on IDEAS

    1. Durlauf, Steven N. & Quah, Danny T., 1999. "The new empirics of economic growth," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 4, pages 235-308 Elsevier.
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    Cited by:

    1. Baas, Timo & Belke, Ansgar, 2014. "Labor Market Reforms and Current Account Imbalances - Beggar-thy-Neighbor Policies in a Currency Union?," Ruhr Economic Papers 505, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    2. European Commission, 2010. "Taxation trends in the European Union: 2010 edition," Taxation trends 2010, Directorate General Taxation and Customs Union, European Commission.
    3. European Commission, 2011. "Taxation trends in the European Union: 2011 edition," Taxation trends 2011, Directorate General Taxation and Customs Union, European Commission.
    4. European Commission, 2011. "Tax Reforms in EU Member States 2011: tax policy challenges for economic growth and fiscal sustainability," Taxation Papers 28, Directorate General Taxation and Customs Union, European Commission.
    5. Alexei Izyumov, 2010. "Human Costs of Post-communist Transition: Public Policies and Private Response," Review of Social Economy, Taylor & Francis Journals, vol. 68(1), pages 93-125.
    6. Primoz Dolenc & Suzana Laporsek, 2012. "Labour Taxation and Its Impact on Employment Growth," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 10(3 (Fall)), pages 301-318.
    7. Figari, Francesco, 2011. "From housewives to independent earners: can the tax system help Italian women to work?," ISER Working Paper Series 2011-15, Institute for Social and Economic Research.
    8. Bachmann, Ronald & Beimann, Boris & Bredtmann, Julia & David, Peggy & Ehlert, Christoph & Kassenböhmer, Sonja & Schaffner, Sandra & Siemers, Lars, 2011. "Studies on flexicurity Lot 1: Study on various aspects of labour market performance using micro data from the European Union statistics on income and living conditions (EU-SILC). Contract No. VC/2010/," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72620.
    9. European Commission, 2009. "Taxation trends in the European Union: 2009 edition," Taxation trends 2009, Directorate General Taxation and Customs Union, European Commission.
    10. Primož Dolenc & Suzana Laporšek, 2010. "Tax Wedge on Labour and its Effect on Employment Growth in the European Union," Prague Economic Papers, University of Economics, Prague, vol. 2010(4), pages 344-358.

    More about this item


    Employment; Tax and benefit policies; Unemployment insurance; Labour supply; Flexicurity; Structural Reforms.;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search


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