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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Jekaterina Navicke & Romas Lazutka, 2016. "Work incentives across the income distribution and for model families in Lithuania: 2005-2013," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 16(2), pages 175-191.
    • Handle: RePEc:bic:journl:v:16:y:2016:i:2:p:175-191
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    File URL: http://www.tandfonline.com/doi/full/10.1080/1406099X.2016.1205407
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    References listed on IDEAS

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    1. Gasior, Katrin & Recchia, Pasquale, 2018. "The use of hypothetical household data for policy learning – EUROMOD HHoT baseline indicators," EUROMOD Working Papers EM6/18, EUROMOD at the Institute for Social and Economic Research.

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    More about this item

    Keywords

    Work incentives; microsimulation; model families; Lithuania;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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