EconPapers    
Economics at your fingertips  
 

Effects of tax-benefit policies on the income distribution and work incentives in Estonia

Alari Paulus and Caroline Klein

No 1570, OECD Economics Department Working Papers from OECD Publishing

Abstract: The paper studies the impact of tax-benefit policies on the distribution of household incomes and work incentives in Estonia. It makes use of microsimulation modelling approach and applies the EU tax-benefit model EUROMOD to quantify the first-order effects of policy changes in 2016-2018 and of a range of alternative policy scenarios aimed at increasing the adequacy of social benefits. According to the simulations, 2016-2017 policies increased household incomes relative to inflation and were both poverty and inequality reducing. Alternative policy scenarios indicate that, among the considered options, increasing the generosity of the subsistence benefit and relaxing its means test by halving the withdrawal rate (currently at 100%), would have the highest first-order impact for a given fiscal cost. However, these measures would also weaken work incentives, which points to a conventional equity-efficiency trade-off. Other simulations demonstrate some scope for improving work incentives at low and middle-income levels together with modest reductions in poverty and inequality.This Working Paper relates to the 2017 OECD Economic Survey of Estonia(http://www.oecd.org/economy/estonia-economic-snapshot/)

Keywords: Estonia; income distribution; tax-benefit policies; work incentives (search for similar items in EconPapers)
JEL-codes: D31 H23 I38 (search for similar items in EconPapers)
Date: 2019-10-04
New Economics Papers: this item is included in nep-cis, nep-eur, nep-pbe and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://doi.org/10.1787/5741a5f3-en (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaaa:1570-en

Access Statistics for this paper

More papers in OECD Economics Department Working Papers from OECD Publishing Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-09-16
Handle: RePEc:oec:ecoaaa:1570-en