Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/91656
Authors: 
Ranđelović, Saša
Žarković Rakić, Jelena
Year of Publication: 
2012
Series/Report no.: 
EUROMOD Working Paper EM11/12
Abstract: 
Inactivity and unemployment rates as well as informal employment rates in Serbia are particularly high among low-paid labor. Labour tax wedge is average at higher wage levels, but high at lower wage levels. The relatively high labour tax burden for low-paid employees is due to several reasons. The most important one is the existence of mandatory minimum base for social security contribution (SSC). This paper uses the tax and benefit micro-simulation model for Serbia (SRMOD), which is based upon EUROMOD platform, in order to evaluate the effects of the abolishment of mandatory minimum SSC base on labour supply incentives. We found that this policy reform would reduce effective average tax rates by more than it would reduce marginal tax rates implying a larger participation response than hours-of-work response. A decrease in both tax rates is most pronounced for lower income groups.
Subjects: 
micro-simulation
labour tax reform
low-paid labour
JEL: 
H24
H31
J22
Document Type: 
Working Paper

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