[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ese/emodwp/em19-19.html
   My bibliography  Save this paper

Work incentives at the extensive and intensive margin in Europe: the role of taxes, benefits and population characteristics

Author

Listed:
  • Xavier Jara Tamayo, Holguer
  • Gasior, Katrin
  • Makovec, Mattia
Abstract
Tax and benefit systems play an important role in determining work incentives at both, the extensive and the intensive margin of labour supply. The aim of this paper is to provide a comprehensive comparative analysis of work incentives in the EU. Our analysis makes use of microsimulation techniques and representative household surveys from all 28 EU countries to compare the distribution of short- and long-term participation tax rates and marginal effective tax rates across population subgroups. We focus on people currently in work and characterise the population facing low work incentives in each country. Our results highlight the large variation in the distribution of work incentives across EU countries, explained not only by differences in the design of tax-benefit systems, but also by the characteristics of the labour force across countries. Unemployment insurance benefits contribute substantially to short-term participation tax rates and explain on average 20 percentage point difference between work incentives of short- vs. long-term unemployment. Our analysis further highlights the need to use microdata to study differences across countries in terms of the population subgroups facing low incentives to work with the aim to inform the policy debate on potential reforms to make work pay.

Suggested Citation

  • Xavier Jara Tamayo, Holguer & Gasior, Katrin & Makovec, Mattia, 2019. "Work incentives at the extensive and intensive margin in Europe: the role of taxes, benefits and population characteristics," EUROMOD Working Papers EM19/19, EUROMOD at the Institute for Social and Economic Research.
    • Handle: RePEc:ese:emodwp:em19-19
    as

    Download full text from publisher

    File URL: https://www.iser.essex.ac.uk/wp-content/uploads/files/working-papers/euromod/em19-19.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jukka Pirttilä & Hakan Selin, 2011. "Tax Policy and Employment: How Does the Swedish System Fare?," CESifo Working Paper Series 3355, CESifo.
    2. Herwig Immervoll, 2004. "Average and Marginal Effective Tax Rates Facing Workers in the EU: A Micro-Level Analysis of Levels, Distributions and Driving Factors," OECD Social, Employment and Migration Working Papers 19, OECD Publishing.
    3. Gasior, Katrin & Recchia, Pasquale, 2018. "The use of hypothetical household data for policy learning – EUROMOD HHoT baseline indicators," EUROMOD Working Papers EM6/18, EUROMOD at the Institute for Social and Economic Research.
    4. André Decoster & Sergio Perelman & Dieter Vandelannoote & Toon Vanheukelom & Gerlinde Verbist, 2015. "A bird’s eye view on 20 years of tax-benefit reforms in Belgium," Working Papers of Department of Economics, Leuven 494657, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    5. Sebastian Königs, 2013. "The Dynamics of Social Assistance Benefit Receipt in Germany: State Dependence Before and After the Hartz Reforms," OECD Social, Employment and Migration Working Papers 136, OECD Publishing.
    6. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, vol. 117(516), pages 1-44, January.
    7. Rafael Lalive, 2007. "Unemployment Benefits, Unemployment Duration, and Post-Unemployment Jobs: A Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 97(2), pages 108-112, May.
    8. Bartels, Charlotte & Pestel, Nico, 2016. "Short- and long-term participation tax rates and their impact on labor supply," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 23(6), pages 1126-1159.
    9. H. Xavier Jara & Alberto Tumino, 2013. "Tax-benefit systems, income distribution and work incentives in the European Union," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 27-62.
    10. Francesco Figari & Andrea Salvatori & Holly Sutherland, 2011. "Economic Downturn and Stress Testing European Welfare Systems," Research in Labor Economics, in: Who Loses in the Downturn? Economic Crisis, Employment and Income Distribution, pages 257-286, Emerald Group Publishing Limited.
    11. Charlotte Bartels & Cortnie Shupe, 2023. "Drivers of participation elasticities across Europe: gender or earner role within the household?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 167-214, February.
    12. Verbist, Gerlinde & Vandelannoote, Dieter & Decoster, André & Perelman, Sergio & Vanheukelom, Toon, 2015. "A bird’s eye view on 20 years of tax-benefit reforms in Belgium," EUROMOD Working Papers EM10/15, EUROMOD at the Institute for Social and Economic Research.
    13. Riddell, W. Craig & Song, Xueda, 2011. "The impact of education on unemployment incidence and re-employment success: Evidence from the U.S. labour market," Labour Economics, Elsevier, vol. 18(4), pages 453-463, August.
    14. Lorenzo Cappellari & Stephen P. Jenkins, 2014. "The Dynamics of Social Assistance Benefit Receipt in Britain," Research in Labor Economics, in: Safety Nets and Benefit Dependence, volume 39, pages 41-79, Emerald Group Publishing Limited.
    15. Holly Sutherland & Francesco Figari, 2013. "EUROMOD: the European Union tax-benefit microsimulation model," International Journal of Microsimulation, International Microsimulation Association, vol. 1(6), pages 4-26.
    16. repec:bla:revinw:v:60:y:2014:i::p:s177-s204 is not listed on IDEAS
    17. Jorgen Hansen & Magnus Lofstrom & Xingfei Liu & Xuelin Zhang, 2014. "State Dependence in Social Assistance Receipt in Canada," Research in Labor Economics, in: Safety Nets and Benefit Dependence, volume 39, pages 81-105, Emerald Group Publishing Limited.
    18. James Browne, 2012. "REWEIGHT2: Stata module to reweight survey data to user-defined control totals," Statistical Software Components S457485, Boston College Department of Economics, revised 06 Sep 2012.
    19. Xavier Jara Tamayo, Holguer & Tumino, Alberto & Sutherland, Holly, 2016. "The role of an EMU unemployment insurance scheme on income protection in case of unemployment," EUROMOD Working Papers EM11/16, EUROMOD at the Institute for Social and Economic Research.
    20. Immervoll, Herwig & Kleven, Henrik Jacobsen & Kreiner, Claus Thustrup & Verdelin, Nicolaj, 2011. "Optimal tax and transfer programs for couples with extensive labor supply responses," Journal of Public Economics, Elsevier, vol. 95(11), pages 1485-1500.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marx, Ive & Haapanala, Henri & Marchal, Sarah, 2024. "Is Poverty Reduction in Europe Doomed? Conjectures, Facts and a Cautiously Optimistic Conclusion," IZA Discussion Papers 16967, Institute of Labor Economics (IZA).
    2. Michael Christl & Silvia Poli, 2021. "Trapped in inactivity? Social assistance and labour supply in Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(3), pages 661-696, August.
    3. H. Xavier Jara & María Gabriela Palacio Ludeña, 2024. "Rethinking social assistance amid the COVID‐19 pandemic: Guaranteeing the right to income security in Ecuador," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1738-1764, April.
    4. Maximilian Joseph Blömer & Andreas Peichl, 2020. "Who Has an Incentive to Work? Participation Tax Rates of the German Tax-Transfer System," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 118, September.
    5. Ive Marx; & Henri Haapanala; & Sarah Marchal;, 2024. "Well-BOA: Is poverty reduction in Europe doomed? Conjectures, facts and a cautiously optimistic conclusion," Working Papers 2403, Herman Deleeck Centre for Social Policy, University of Antwerp.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Charlotte Bartels & Cortnie Shupe, 2023. "Drivers of participation elasticities across Europe: gender or earner role within the household?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 167-214, February.
    2. Klára Kalíšková, 2020. "Tax and transfer policies and the female labor supply in the EU," Empirical Economics, Springer, vol. 58(2), pages 749-775, February.
    3. Figari Francesco & Gandullia Luca & Lezzi Emanuela, 2018. "Marginal Cost of Public Funds: From the Theory to the Empirical Application for the Evaluation of the Efficiency of the Tax-Benefit Systems," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(4), pages 1-16, October.
    4. Mike Brewer & Jonathan Shaw, 2018. "How Taxes and Welfare Benefits Affect Work Incentives," Fiscal Studies, John Wiley & Sons, vol. 39(1), pages 5-38, March.
    5. Diego Collado & Bea Cantillon & Karel Van den Bosch & Tim Goedemé & Dieter Vandelannoote, 2016. "The end of cheap talk about poverty reduction: the cost of closing the poverty gap while maintaining work incentives," ImPRovE Working Papers 16/08, Herman Deleeck Centre for Social Policy, University of Antwerp.
    6. Stefan Bach & Peter Haan & Richard Ochmann, 2013. "Taxation of Married Couples in Germany and the UK: One-Earner Couples Make the Difference," International Journal of Microsimulation, International Microsimulation Association, vol. 6(3), pages 3-24.
    7. Michael Christl & Silvia De Poli & Janos Varga, 2022. "Reducing the income tax burden for households with children: an assessment of the child tax credit reform in Austria," Fiscal Studies, John Wiley & Sons, vol. 43(2), pages 151-177, June.
    8. Regina T. Riphahn & Christoph Wunder, 2016. "State dependence in welfare receipt: transitions before and after a reform," Empirical Economics, Springer, vol. 50(4), pages 1303-1329, June.
    9. Salvador Barrios & Serena Fatica & Diego Martinez-Lopez & Gilles Mourre, 2018. "The Fiscal Effects of Work-related Tax Expenditures in Europe," Public Finance Review, , vol. 46(5), pages 793-820, September.
    10. Sinem H. Ayhan & Selin Pelek, 2020. "State Dependence in Welfare Benefits in a Non‐Welfare Context," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 711-735, September.
    11. Xavier Jara & David Rodríguez, 2019. "Financial disincentives to formal work: Evidence from Ecuador and Colombia," WIDER Working Paper Series wp-2019-14, World Institute for Development Economic Research (UNU-WIDER).
    12. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Nicolaj Verdelin, 2008. "An Evaluation of the Tax-Transfer Treatment of Married Couples in European Countries," EPRU Working Paper Series 08-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    13. Orsetta Causa & Alain de Serres & Nicolas Ruiz, 2015. "Can pro-growth policies lift all boats?: An analysis based on household disposable income," OECD Journal: Economic Studies, OECD Publishing, vol. 2015(1), pages 227-268.
    14. Jäntti, Markus & Pirttilä, Jukka & Selin, Håkan, 2015. "Estimating labour supply elasticities based on cross-country micro data: A bridge between micro and macro estimates?," Journal of Public Economics, Elsevier, vol. 127(C), pages 87-99.
    15. Coda Moscarola, Flavia & Colombino, Ugo & Figari, Francesco & Locatelli, Marilena, 2020. "Shifting taxes away from labour enhances equity and fiscal efficiency," Journal of Policy Modeling, Elsevier, vol. 42(2), pages 367-384.
    16. Tim Goedemé & Karel Van den Bosch & Lina Salanauskaite & Gerlinde Verbist, 2013. "Testing the Statistical Significance of Microsimulation Results: Often Easier than You Think. A Technical Note," ImPRovE Working Papers 13/10, Herman Deleeck Centre for Social Policy, University of Antwerp.
    17. Marinescu, Ioana, 2017. "The general equilibrium impacts of unemployment insurance: Evidence from a large online job board," Journal of Public Economics, Elsevier, vol. 150(C), pages 14-29.
    18. Spencer Bastani & Ylva Moberg & Håkan Selin, 2016. "Estimating Participation Responses Using Transfer Program Reform," CESifo Working Paper Series 5781, CESifo.
    19. Susan Namirembe Kavuma & Christine Byaruhanga & Nicholas Musoke & Patrick Loke & Michael Noble & Gemma Wright, 2020. "An analysis of the distributional impact of excise duty in Uganda using a tax-benefit microsimulation model," WIDER Working Paper Series wp-2020-70, World Institute for Development Economic Research (UNU-WIDER).
    20. Michaël Sicsic, 2018. "Financial Incentives to Work in France between 1998 and 2014," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 503-504, pages 13-35.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ese:emodwp:em19-19. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jonathan Nears (email available below). General contact details of provider: https://edirc.repec.org/data/rcessuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.