Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154699
Authors: 
Bennmarker, Helge
Calmfors, Lars
Seim, Anna
Year of Publication: 
2014
Citation: 
[Journal:] IZA Journal of Labor Policy [ISSN:] 2193-9004 [Volume:] 3 [Year:] 2014 [Pages:] 1-20
Abstract: 
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 per cent reduction in the unemployment benefit level or a one per cent 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.
Subjects: 
Earned income tax credit
Unemployment benefits
Wage formation
JEL: 
J31
J38
H24
Persistent Identifier of the first edition: 
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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