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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, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0409007 Note: Type of Document - pdf; pages: 105
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Dena Ringold & Leszek Kasek, 2007. "Social Assistance in the New EU Member States : Strengthening Performance and Labor Market Incentives," World Bank Publications, The World Bank, number 6744.
    3. 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.
    4. 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.
    5. 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.
    6. Alho, Kari O. E., 2006. "Labour Market Institutions and the Effectiveness of Tax and Benefit Policies in Enchancing Employment: A General Equilibrium Analysis," Discussion Papers 1008, The Research Institute of the Finnish Economy.
    7. Primoz Dolenc & Milan Vodopivec, 2005. "Does work pay in Slovenia?," Financial Theory and Practice, Institute of Public Finance, vol. 29(4), pages 341-362.
    8. Schuknecht, Ludger & Ebert, Werner & Thöne, Michael & Afonso, António, 2005. "Quality of public finances and growth," Working Paper Series 438, European Central Bank.

    More about this item

    Keywords

    Unemployment trap; incentive to work; METR; tax on labour Make work pay; unemployment benefits.;

    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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