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Indicators of unemployment and low-wage traps (Marginal effective tax rates on labour)

Author

Listed:
  • Giuseppe Carone

    (European Commission)

  • Aino Salomaki

    (European Commission)

  • Herwig Immervoll

    (OECD)

  • Dominique Paturot

    (OECD)

Abstract

This paper presents results of an on-going joint European Commission / OECD project, aimed at monitoring the direct influence of tax and benefit instruments on household incomes. Indicators of financial work incentives are needed for identifying any undesired influences of taxes and social transfers on people’s work decisions. Marginal effective tax rates (METRs) are calculated in order to show what part of a change in earnings is “taxed away” by the combined operation of taxes, social security contributions (SSCs), and any withdrawal of earnings related social benefits. Three different types of METRs are calculated in order to measure so-called low-wage,unemployment and inactivity traps, that is situations where incentives to work are low. The results allow the identification of countries and family types that face little financial incentive to increase work effort or to take up a job.

Suggested Citation

  • Giuseppe Carone & Aino Salomaki & Herwig Immervoll & Dominique Paturot, 2004. "Indicators of unemployment and low-wage traps (Marginal effective tax rates on labour)," Labor and Demography 0409007, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpla:0409007
    Note: Type of Document - pdf; pages: 105
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    References listed on IDEAS

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    2. 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/2010/0032. Final Report - February 2011," RWI Projektberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, number 72620.
    3. Elise Aerts; & Ive Marx; & Gerlinde Verbist;, 2025. "Revisiting the ‘Make Work Pay’ debate: How pervasive are dependency and poverty traps really?," Working Papers 2509, Herman Deleeck Centre for Social Policy, University of Antwerp.
    4. Alina ARSĂNI & George ȘTEFAN & Anca PARASCHIV-GHERMAN, 2017. "Exports in the European Union sub-models. Determinants and performances," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(610), S), pages 109-126, Spring.
    5. Dena Ringold & Leszek Kasek, 2007. "Social Assistance in the New EU Member States : Strengthening Performance and Labor Market Incentives," World Bank Publications - Books, The World Bank Group, number 6744, April.
    6. Võrk, Andres, 2009. "Labour supply incentives and income support systems in Estonia," Working Paper Series 2009:31, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    7. Schuknecht, Ludger & Ebert, Werner & Thöne, Michael & Afonso, António, 2005. "Quality of public finances and growth," Working Paper Series 438, European Central Bank.
    8. Michael Mitsopoulos, 2017. "Overtaxation of Private Sector Salaried Employment as a Key Impediment to the Recovery of Greece," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Dimitrios D. Thomakos & Konstantinos I. Nikolopoulos (ed.), Taxation in Crisis, chapter 12, pages 289-336, Palgrave Macmillan.
    9. Michael MITSOPOULOS & Theodore PELAGIDIS, 2021. "Labor Taxation And Investment In Developed Countries. The Impact On Employment," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 13-31, June.
    10. Primoz Dolenc & Milan Vodopivec, 2005. "Does work pay in Slovenia?," Financial Theory and Practice, Institute of Public Finance, vol. 29(4), pages 341-362.
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    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • C80 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - General

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