Earned income tax credits, unemployment benefits and wages: Empirical evidence from Sweden

Arbeitspapier

Although there is a large literature on employment effects of earned income tax credits (EITCs) and unemployment benefits, less is known about wage effects. In our model the impact is via the net (after-tax) replacement rate. Using a panel of individuals from Sweden, we find a positive relationship between the net replacement rate and wages with semi-elasticities in the range 0.2-0.4. This implies that a one percent reduction in the unemployment benefit level or a one percent increase in the net-of-tax rate is associated with a fall in the before-tax wage of 0.1-0.2 per cent. EITCs and unemployment benefit reductions are thus likely to induce wage moderation.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2013:12

Classification and Topics

• Classification: Wirtschaft ; Wage Level and Structure; Wage Differentials ; Wages, Compensation, and Labor Costs: Public Policy ; Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
• Subject: earned income tax credit ; unemployment benefits ; wage formation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bennmarker, Helge ; Calmfors, Lars ; Seim, Anna Larsson
• Event: Veröffentlichung
• (who): Institute for Evaluation of Labour Market and Education Policy (IFAU)
• (where): Uppsala
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/82273
• Last update: 10.03.2025, 11:44 AM CET