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Beans for breakfast? How exportable is the British workfare model?

Kristian Orsini () and Olivier Bargain ()

Open Access publications from School of Economics, University College Dublin

Abstract: Social assistance and inactivity traps have long been considered amongst the main causes of the poor employment performance of EU countries. The success of New Labour has triggered a growing interests in instruments capable of combining the promotion of responsibility and self-sufficiency with solidarity with less skilled workers. Making-work-pay (MWP) policies, consisting of transfers to households with low earning capacity, have quickly emerged as the most politically acceptable instruments in tax-benefit reforms of many Anglo Saxon countries. This chapter explores the impact of introducing the British Working Families' Tax Credit in three EU countries with rather different labor market and welfare institutions: Finland, France and Germany. Simulating the reform reveals that, while first round effects on income distribution is considerable, the interaction of the new instrument with the structural characteristics of the economy and the population may lead to counterproductive second round effects (i.e. changes in economic behavior). The implementation of the reform, in this case, could only be justified if the social inclusion (i.e. transition into activity) of some specific household types (singles and single mothers) is valued more than a rise in the employment per se.

Keywords: Tax-benefit systems; In-work benefits; Microsimulation; Household labor supply; Taxation--Europe; Labor supply--Europe; Employment subsidies--Great Britain (search for similar items in EconPapers)
JEL-codes: C25 C52 H31 J22 (search for similar items in EconPapers)
Date: 2006-03
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http://hdl.handle.net/10197/557 First version, 2006 (application/pdf)

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Working Paper: Beans for breakfast? How exportable is the British workfare model? (2006) Downloads
Working Paper: Beans for Breakfast? How Exportable Is the British Workfare Model? (2006) Downloads
Working Paper: Beans for breakfast? How exportable is the British workfare model? (2006) Downloads
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