The impact of in-work benefits on work incentives and poverty in four European countries

Abstract

This article studies the impact of design characteristics of in-work benefits on labour supply and poverty in an international comparative setting, taking account of both first-order (without taking labour supply effects into account) and second-order effects (taking labour supply effects into account). We use the microsimulation model EUROMOD, which has been enriched with a structural discrete choice labour supply model to take account of labour supply reactions. The analysis is performed for four EU member states: Belgium, Italy, Poland and Sweden. The results show that design characteristics matter substantially, though the specific effects differ in magnitude across countries, indicating there is no one-size-fits-all solution. Throughout the analysis, numerous trade-offs are uncovered: not only between work incentives and poverty goals, but also within work incentives themselves. Taking account of behavioural reactions attenuates the impact on poverty outcomes, signalling the importance of bringing these effects into the empirical analysis.

Digital policy to disability employment? An ecosystem perspective on China and Australia

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European labour markets and social policy: recent research and future directions

“…These policies may take the form of more liberal rules on the assessment of eligibility for social assistance benefits (e.g., Hiilamo & Kautto, 2009), or the creation of dedicated new 'in-work' benefits, sometimes paid through the tax system (Cousins, 2014). Much research on the latter has involved simulating the impact of their introduction in different contexts and with different design features (Figari, 2010;Vandelannoote & Verbist, 2020), and highlighted their context-specific effects and the complex trade-offs in policy design and potentially gendered effects where household based. More qualitative research, which has to date particularly focused on the impact of such policies on lone parents (Duncan & Strell, 2004;Millar & Ridge, 2020), has added important insights on the complex rationalities at play in the appropriation of these opportunities by individuals as well as on the role of structural constraints, including the availability of suitable employment opportunities.…”

A new poverty indicator for Europe: The extended headcount ratio

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