IDEAS home Printed from https://ideas.repec.org/a/ozl/journl/v14y2011i3p265-288.html
   My bibliography  Save this article

Measuring Worker Disincentives: Taxes, Benefits and the Transition into Employment

Author

Listed:
  • Alfred Michael Dockery

    (Curtin University)

  • Rachel Ong

    (Curtin University)

  • Gavin Wood

    (RMIT University)

Abstract

Disincentives to employment participation arising from the tax-benefit system have been a major concern for welfare reform. Data from the Household, Income and Labour Dynamics in Australia Survey are used to generate and test the robustness of three commonly used disincentive measures for non-working Australians: effective marginal tax rates, replacement rates and participation tax rates. The results of transition models suggest financial disincentives as measured in the current period have a large effect on employment outcomes one year later, and the replacement rate is the preferred measure for modelling disincentives facing the unemployed. While attracting most attention in the welfare-to-work debate, effective marginal tax rates are found to be an inappropriate measure of work disincentives facing the non-employed.

Suggested Citation

  • Alfred Michael Dockery & Rachel Ong & Gavin Wood, 2011. "Measuring Worker Disincentives: Taxes, Benefits and the Transition into Employment," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 14(3), pages 265-288.
    • Handle: RePEc:ozl:journl:v:14:y:2011:i:3:p:265-288
    as

    Download full text from publisher

    File URL: http://ftprepec.drivehq.com/ozl/journl/downloads/AJLE143dockery.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:bla:ausecp:v:39:y:2000:i:3:p:327-46 is not listed on IDEAS
    2. Alan Duncan & Mark N. Harris, 2002. "Simulating the Behavioural Effects of Welfare Reforms Among Sole Parents in Australia," The Economic Record, The Economic Society of Australia, vol. 78(242), pages 264-276, September.
    3. Card, David & Levine, Phillip B., 2000. "Extended benefits and the duration of UI spells: evidence from the New Jersey extended benefit program," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 107-138, October.
    4. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non‐Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, March.
    5. Paul Flatau & Gavin A. Wood, 2000. "Comprehensive Income Measures, Housing Equity, and Tax‐Transfer Effects," Australian Economic Papers, Wiley Blackwell, vol. 39(3), pages 327-346, September.
    6. Guyonne R. Kalb, 2000. "Labour Supply and Welfare Participation in Australian Two-Adult Households: Accounting for Involuntary Unemployment and the 'Cost' of Part-time Work," Centre of Policy Studies/IMPACT Centre Working Papers bp-35, Victoria University, Centre of Policy Studies/IMPACT Centre.
    7. Ann Harding & Josh Polette, 1995. "The Price of Means‐Tested Transfers: Effective Marginal Tax Rates in Australia in 1994," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 28(3), pages 100-106, July.
    8. Schuetze, Herb J., 2000. "Taxes, economic conditions and recent trends in male self-employment: a Canada-US comparison," Labour Economics, Elsevier, vol. 7(5), pages 507-544, September.
    9. Gillian Beer, 1998. "The State of Play of Effective Marginal Tax Rates in Australia in 1997," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(3), pages 263-270, September.
    10. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Meg Smith & Kathy Tannous, 2013. "Access to Full-Time Employment - Does Gender Matter?," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 16(2), pages 237-257.
    2. Rachel Ong & Gavin Wood & Melek Cigdem, 2013. "Work incentives and decisions to remain in paid work in Australia," Bankwest Curtin Economics Centre Working Paper series WP1312, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rachel Ong & Gavin Wood & Melek Cigdem, 2013. "Work incentives and decisions to remain in paid work in Australia," Bankwest Curtin Economics Centre Working Paper series WP1312, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    2. Alfred Michael Dockery & Paul Flatau, 2008. "An analysis of the impact of tax and welfare reform measures on effective marginal tax rates in Australia 1982-2002," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 11(3), pages 203-226.
    3. David Ingles, 2000. "Rationalising the Interaction of Tax and social Security: Part II: Fundamental Reform Options," CEPR Discussion Papers 424, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    4. Matthew Toohey & Gillian Beer, 2004. "Financial incentives to work for married mothers under a new tax system," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(1), pages 53-69, March.
    5. Sandra Dandie & Joseph Mercante, 2007. "Australian labour supply elasticities: Comparison and critical review," Treasury Working Papers 2007-04, The Treasury, Australian Government, revised Oct 2007.
    6. Guyonne Kalb & Rosanna Scutella, 2003. "New Zealand Labour Supply from 1991-2001: An Analysis Based on a Discrete Choice Structural Utility Model," Treasury Working Paper Series 03/23, New Zealand Treasury.
    7. Robert Breunig & Deborah A. Cobb‐Clark & Xiaodong Gong, 2008. "Improving the Modelling of Couples’ Labour Supply," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 466-485, December.
    8. Steven D. Mullins, 2012. "The Unemployment Impact of the 2008 Extension of Unemployment Insurance: As High as Robert Barro Suggested?," Econ Journal Watch, Econ Journal Watch, vol. 9(1), pages 3-20, January.
    9. David Ingles, 2000. "Rationalising the Interaction ofTax and Social Security: PartI: Specific Problem Areas," CEPR Discussion Papers 423, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    10. Hielke BUDDELMEYER & Guyonne KALB, 2008. "Labour Supply and Welfare Participation in the Australian Population: Using Observed Job Search to Account for Involuntary Unemployment," EcoMod2008 23800020, EcoMod.
    11. Guyonne Kalb, 2002. "Estimation of Labour Supply Models for Four Separate Groups in the Australian Population," Melbourne Institute Working Paper Series wp2002n24, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    12. Gianfranco DI VAIO & Michele BATTISTI, 2010. "A Spatially-Filtered Mixture of Beta-Convergence Regression for EU Regions, 1980-2002," Regional and Urban Modeling 284100013, EcoMod.
    13. Georgios Bertsatos & Plutarchos Sakellaris & Mike G. Tsionas, 2022. "Extensions of the Pesaran, Shin and Smith (2001) bounds testing procedure," Empirical Economics, Springer, vol. 62(2), pages 605-634, February.
    14. Jan Boone & Jan Ours, 2012. "Why is There a Spike in the Job Finding Rate at Benefit Exhaustion?," De Economist, Springer, vol. 160(4), pages 413-438, December.
    15. Elira Kuka, 2020. "Quantifying the Benefits of Social Insurance: Unemployment Insurance and Health," The Review of Economics and Statistics, MIT Press, vol. 102(3), pages 490-505, July.
    16. Cederlöf, Jonas, 2020. "Extended unemployment benefits and the hazard to employment," Working Paper Series 2020:25, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    17. Gruener Hans Peter & Hayo Bernd & Hefeker Carsten, 2009. "Unions, Wage Setting and Monetary Policy Uncertainty," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-25, October.
    18. repec:ebl:ecbull:v:6:y:2004:i:4:p:1-8 is not listed on IDEAS
    19. Christian Hubert Ebeke, 2011. "Does the dual-citizenship recognition determine the level and the utilization of international remittances? Cross-Country Evidence," CERDI Working papers halshs-00559528, HAL.
    20. Simplice A. Asongu & Nicholas M. Odhiambo, 2019. "Governance, capital flight and industrialisation in Africa," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-22, December.
    21. Pamela E. Ofori & Simplice A. Asongu & Vanessa S. Tchamyou, 2021. "The Synergy between Governance and Economic Integration in Promoting Female Economic Inclusion in Sub-Saharan Africa," Working Papers 21/071, European Xtramile Centre of African Studies (EXCAS).

    More about this item

    Keywords

    Welfare and Poverty; Government Programs; Provision and Effects of Welfare Programs; Unemployment Models; Duration; Incidence and Job Search; Time Allocation; Labour Supply;
    All these keywords.

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ozl:journl:v:14:y:2011:i:3:p:265-288. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sandie Rawnsley (email available below). General contact details of provider: https://edirc.repec.org/data/becurau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.