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

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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)

  • Vujić Sunčica

    (University of Antwerp and University of Bath, Department of Economics, Belgium)

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.

Suggested Citation

  • Ranđelović Saša & Žarković Rakić Jelena & Vladisavljević Marko & Vujić Sunčica, 2019. "Labour Supply and Inequality Effects of In-Work Benefits: Evidence from Serbia," Naše gospodarstvo/Our economy, Sciendo, vol. 65(3), pages 1-22, September.
    • Handle: RePEc:vrs:ngooec:v:65:y:2019:i:3:p:1-22:n:1
    DOI: 10.2478/ngoe-2019-0010
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    More about this item

    Keywords

    in-work benefits; labour supply; inequality; discrete choice model; microsimulation;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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