Negative Income Tax and Labor Market Participation: A Short Run Analysis

Samir Amine and Pedro Lages Dos Santos

CIRANO Working Papers from CIRANO

Abstract: This article examines the effects of the Negative Income Tax, in a matching model, on labor market participation. We show that the introduction of such instrument reduces unemployment and improves the situation of the poorest. But, amazingly, it provokes a fall on labor market participation principally because the agents are then less selective. We find another surprising result: despite the rise on participation, the increasing of unemployment benefits improves the situation of the firms at the expense of workers.

Keywords: Matching; participation; negative income tax. (search for similar items in EconPapers)
JEL-codes: D63 H21 J41 J64 (search for similar items in EconPapers)
Date: 2015-07-13
New Economics Papers: this item is included in nep-pbe and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2015s-28

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