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

Samir Amine and Pedro LAGES DOS Santos
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Pedro LAGES DOS Santos: University of Le Havre, France

Theoretical and Applied Economics, 2012, vol. XVIII(2012), issue 1(566), 41-56

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)
Date: 2012
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