Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82273
Authors: 
Bennmarker, Helge
Calmfors, Lars
Seim, Anna Larsson
Year of Publication: 
2013
Series/Report no.: 
Working Paper, IFAU - Institute for Evaluation of Labour Market and Education Policy 2013:12
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 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.
Subjects: 
earned income tax credit
unemployment benefits
wage formation
JEL: 
J31
J38
H24
Document Type: 
Working Paper

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