In-work benefits for married couples: an ex-ante evaluation of EITC and WTC policies in Italy

Giuseppe De Luca (), Claudio Rossetti and Daniela Vuri ()

No 12, Working Papers from Department of the Treasury, Ministry of the Economy and of Finance

Abstract: This paper investigates labor supply and redistributive effects of in-work benefits for Italian married couples using a tax-benefit microsimulation model and a multi-sectoral discrete choice model of labor supply. We consider in-work benefits based on the Earned Income Tax Credit (EITC) and the Working Tax Credit (WTC) existing in the US and the UK, respectively. The standard design of these income support mechanisms is however augmented with a premium for two-earner households to avoid potential disincentive effects on secondary earners. Revenue neutral policy simulations show that our reforms may greatly improve the current Italian tax-benefit system in terms of both incentive and redistributive effects. Furthermore, neglecting sector-specific attributes of the various job opportunities may lead to an oversimplified representation of the choice set that does not allow to capture some labor market transitions and thus results in attenuated labor supply responses.

Keywords: In-work benefits; sectoral labor supply; poverty; microsimulation; married couples (search for similar items in EconPapers)
JEL-codes: H31 H53 I38 (search for similar items in EconPapers)
Pages: 34
Date: 2013-11
New Economics Papers: this item is included in nep-dcm, nep-eur and nep-ltv
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: In-Work Benefits for Married Couples: An Ex-Ante Evaluation of EITC and WTC Policies in Italy (2012)
Working Paper: In-Work Benefits for Married Couples: An Ex-Ante Evaluation of EITC and WTC Policies in Italy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:itt:wpaper:wp2013-12

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