Work incentives across the income distribution and for model families in Lithuania: 2005-2013

Jekaterina Navicke () and Romas Lazutka ()
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Jekaterina Navicke: Department of Social Policy and Social Work, Faculty of Philosophy, Vilnius University, Vilnius, Lithuania
Romas Lazutka: Economic Theory Department, Faculty of Economics, Vilnius University, Vilnius, Lithuania

Baltic Journal of Economics, 2016, vol. 16, issue 2, 175-191

Abstract: The aim of this paper is to evaluate the impact of cash social benefits on work incentives across the income distribution and among selected model family types in Lithuania. The analysis of work incentives was carried out for 2005–2013 based on a combination of measures estimated using the EUROMOD tax-benefit microsimulation model. The analysis revealed high disincentives to work at the bottom of the income distribution, dominated by the effect of cash social benefits compared to taxes or social insurance contributions. A strong trade-off between benefit adequacy and work incentives is built into the design of the national cash benefit system, particularly social assistance. The challenge for policy design is thus to encourage active labour market participation among low earners without eroding the minimum income protection floor.

Keywords: Work incentives; microsimulation; model families; Lithuania (search for similar items in EconPapers)
JEL-codes: C15 D31 H31 I38 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:16:y:2016:i:2:p:175-191

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