How taxes and welfare distort work incentives: static lifecycle and dynamic perspectives

Mike Brewer, Monica Costa Dias and Jonathan Shaw
Additional contact information
Jonathan Shaw: Institute for Fiscal Studies and Financial Conduct Authority

No W13/01, IFS Working Papers from Institute for Fiscal Studies

Abstract: Personal taxes and benefits affect the incentive to work over the lifecycle by altering income-age profiles, insuring against adverse shocks, and changing the returns to human capital. Previous work investigating the impact of taxes and benefits on work incentives has tended to ignore these dynamic considerations. In this paper, we use a dynamic model to show how a lifecycle perspective alters our impression of the effect of the tax and benefit system on female work incentives. We describe how work incentives change over the life and show how they depend on lifecycle circumstances. We also devise a forward-looking measure of work incentives that incorporates all the dynamic considerations likely to affect work decisions at any given age. We find that individuals experience considerable variability in work incentives across life that outweighs the variability across individuals. Changes pattern of family types across life is key to explaining these patterns: work incentives vary dramatically depending on family composition, and most women experience a number of different family types during the course of their lives. We also find that differences in family type are an important explanation for why static and forwardlooking PTRs diverge, though this is more to do with differences in how women in families with different compositions behave.

Keywords: female labour supply; lifecycle; work incentives; taxes (search for similar items in EconPapers)
JEL-codes: H24 I24 I38 J22 (search for similar items in EconPapers)
Date: 2013-01-23
New Economics Papers: this item is included in nep-dem, nep-hrm, nep-lab, nep-lma, nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.ifs.org.uk/wps/wp1301.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.ifs.org.uk/wps/wp1301.pdf [301 Moved Permanently]--> https://www.ifs.org.uk/wps/wp1301.pdf [302 Found]--> https://ifs.org.uk/wps/wp1301.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ifs:ifsewp:13/01

Ordering information: This working paper can be ordered from
The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE

Access Statistics for this paper

More papers in IFS Working Papers from Institute for Fiscal Studies The Institute for Fiscal Studies 7 Ridgmount Street LONDON WC1E 7AE. Contact information at EDIRC.
Bibliographic data for series maintained by Emma Hyman ().