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Journal Article

In-work policies in Europe: killing two birds with one stone?

Authors

Publication date

2006

Abstract

Generous social assistance has been held responsible for inactivity traps and social exclusion in several European countries, hence the recent trend of promoting employment through in-work transfers. Yet, the relative consensus on the need for dmaking work payT policies is muddied by a number of concerns relative to the design of the reforms and the treatment of the family dimension. Relying on EUROMOD, a EU-15 integrated tax-benefit microsimulation software, we simulate two types of in-work benefits. The first one is means-tested on family income, in the fashion of the British Working Family Tax Credit, while the second is a purely individualized policy. Both reforms are built on the same cost basis (after behavioral responses) and simulated in three European countries suspected to experience large poverty traps, namely Finland, France and Germany. The potential labor supply responses to the reforms and the subsequent redistributive impacts are assessed for each country using a structural discrete-choice model. We compare how both reforms achieve poverty reduction and social inclusion (measured as the number of transitions into activity). All three countries present different initial conditions, including existing tax-benefit systems and distribution of incomes and wages. These sources of heterogeneity are exploited together with different labor supply elasticities to explain the cross-country differences in the impact of the reforms.

Published in

Labour Economics

Volume and page numbers

13 , 667 -697

DOI

http://dx.doi.org/10.1016/j.labeco.2005.10.007

ISSN

16

Subjects

Welfare Benefits and Microsimulation

Links

http://serlib0.essex.ac.uk/record=b1650556~S5

Notes

Albert Sloman Library Periodicals *restricted to Univ. Essex registered users*


Related publications

  1. In-work policies in Europe: killing two birds with one stone?

    Olivier Bargain and Kristian Orsini

    1. Welfare Benefits
    2. Microsimulation

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