Is Belgium 'Making Work Pay'?

24 Pages Posted: 3 Oct 2006

Date Written: March 22, 2006

Abstract

In the period 2001-2004 two major reforms followed in Belgium: a personal income tax reform (2001) and a reform of social security contributions for low skilled employees (2004). Using a discrete hours labor supply model, this paper assesses the impact of these reforms on aggregate labor supply of males and females in couples. Results suggest that the reforms had a positive (but moderate) effect on both participation and hours worked. Targeted reductions in social security contributions, however, proved to be more effective than the newly introduced tax credit on low earnings.

Keywords: Tax-benefit Systems, Microsimulation, Household Labour Supply, Multinomial Logit

JEL Classification: D31, H21, H23, H24, H31, J22

Suggested Citation

Orsini, Kristian, Is Belgium 'Making Work Pay'? (March 22, 2006). Available at SSRN: https://ssrn.com/abstract=934317 or http://dx.doi.org/10.2139/ssrn.934317

Kristian Orsini (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

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