Earned income tax credits, unemployment benefits and wages: empirical evidence from Sweden

Helge Bennmarker, Lars Calmfors () and Anna Seim

IZA Journal of Labor Policy, 2014, vol. 3, issue 1, 1-20

Abstract: Although there is a large literature on employment effects of earned income tax credits (EITCs) and unemployment benefits, less is known about wage effects. In our model, the impact is via the net (after-tax) replacement rate. Using a panel of individuals from Sweden, we find a positive relationship between the net replacement rate and wages with semi-elasticities in the range 0.2-0.4. This implies that a one per cent reduction in the unemployment benefit level or a one per cent increase in the net-of-tax rate is associated with a fall in the before-tax wage of 0.1-0.2 per cent. EITCs and unemployment benefit reductions are thus likely to induce wage moderation. Copyright Bennmarker et al.; licensee Springer. 2014

Keywords: J31; J38; H24; Earned income tax credit; Unemployment benefits; Wage formation (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (8)

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Working Paper: Earned income tax credits, unemployment benefits and wages: empirical evidence from Sweden (2013)
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DOI: 10.1186/s40173-014-0026-1

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