Work (dis)incentives for social benefit recipients in Greece

Maria Flevotomou, Chrysa Leventi and Manos Matsaganis
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Maria Flevotomou: Bank of Greece
Chrysa Leventi: European Commission Joint Research Centre
Manos Matsaganis: Polytechnic University of Milan

Economic Bulletin, 2026, issue 63, 7-25

Abstract: This paper investigates to what extent the strengthening of Greece’s social safety net since the recent sovereign debt crisis has weakened work incentives for benefit recipients. Using the tax-benefit microsimulation model EUROMOD and its Hypothetical Household Tool (HHoT), we estimate participation tax rates (PTRs) and marginal effective tax rates (METRs) in 2024 for several stylised household types, accounting for the interaction between income taxes, social insurance contributions and means-tested benefits. Our results suggest that PTRs can reach near-prohibitive levels, particularly when transition into employment is associated with the withdrawal of the unemployment benefit. METRs are similarly distorted, exhibiting sharp kinks where means-tested benefits are abruptly withdrawn rather than gradually tapered. The paper concludes with some policy recommendations to improve work incentives, while preserving the anti-poverty gains achieved over the past decade.

Keywords: work incentives; social benefits; tax-benefit microsimulation; participation tax rates; marginal effective tax rates (search for similar items in EconPapers)
JEL-codes: I38 J22 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bog:econbl:y:2026:i:63:p:7-25

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