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Labour Supply and Inequality Effects of In-Work Benefits: Evidence from Serbia

Ranđelović Saša (), Žarković Rakić Jelena (), Vladisavljević Marko () and Sunčica Vujić ()
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Ranđelović Saša: University of Belgrade, Faculty of Economics, Serbia
Žarković Rakić Jelena: University of Belgrade, Faculty of Economics, Serbia
Vladisavljević Marko: Institute of Economic Sciences, Belgrade, Serbia

Naše gospodarstvo/Our economy, 2019, vol. 65, issue 3, 1-22

Abstract: Low labour market participation, together with the high effective tax wedge at low wage levels, create a fertile ground for the introduction of the in-work benefits (IWB) in Serbia. Our paper provides an ex-ante evaluation of the two IWB schemes, directed at stimulating the labour supply and more equal income distribution. The methodological approach combines the tax-and-benefit microsimulation model with the discrete labour supply model. Our results show that both individual and family-based IWB schemes would considerably boost labour market participation, although family-based benefits would have disincentivizing effects for the secondary earners in couples. Most of the behavioural changes take place among the poorest individuals, with significant redistributive effects.

Keywords: in-work benefits; labour supply; inequality; discrete choice model; microsimulation (search for similar items in EconPapers)
JEL-codes: J22 H24 D31 I32 (search for similar items in EconPapers)
Date: 2019
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