: The impact of in-work conditionality of Universal Credit on benefit take-up and employment
Universal Credit (UC) is the main means-tested benefit in the UK welfare system, supporting low-income individuals and families. UC replaced multiple benefits with a single payment, while introducing strict job search requirements and in-work conditionality. Individuals who are not working and are deemed capable of work are usually required, among other things, to actively look for a job, while claimants who are working but earning below a threshold are required to take steps to increase their earnings, including looking for alternative jobs and increasing work hours. Failure to comply can result in benefit sanctions. Research shows that UC conditionality can have detrimental effects on individual well-being and mental health, while evidence of its employment effects is mixed. In this study, we jointly model the take-up behaviour and labour supply decisions through the lens of a structural random utility model. Individuals anticipate that receiving UC negatively affects their well-being, and job search requirements may reduce the utility they derive from income and leisure. As a result, they might choose not to take up UC even if they are eligible and modify their labour supply accordingly. In this paper, we compare baseline simulations with estimated parameters with counterfactual simulations where the effects of conditionality are muted/removed. This allows us to quantify the impact of conditionality on a number of outcomes of interest, including benefit take-up and employment.
Read MoreEstimation and Simulation of RURO Labor Supply Models with Administrative Data: Re-assessing the Evidence from Belgium
This paper estimates a Random Utility Random Opportunity model of labor supply using linked Belgian administrative data . The framework allows individuals to choose among stochastic wage and hours offers, capturing both participation decisions and hours adjustments within a unified structure. By combining tax records, social security data, and demographic registers, we construct precise measures of earnings, hours, and household characteristics.
Read MoreIncreasing the minimum wage to decrease labor cost ? An analysis by microsimulation for the case of France
This paper analyzes the reduction in total labor costs induced by an increase in the minimum wage in France. Using the Ines microsimulation model developed by the French National Statistical Institute (Insee), I simulate a 2% increase in wages for all workers paid at the minimum wage. Due to the complex of exemptions of the French socio-fiscal system, an increase in the minimum wage leads to a reduction in employers’ social security contributions (SSCs) for workers earning between 1.01 and 3.5 times the minimum wage. I confirm existing results from L’horty (2000): overall, a 1% increase in the minimum wage reduces employers’ SSCs by approximately €1.67 billion.
Read MoreIntegrating Labor Demand Frictions in a Random Utility Random Opportunity Labor Supply Model
This paper studies labor market responses to tax policy using a structural labor supply model estimated within a Random Utility - Random Opportunity framework. The RURO model represents labor supply as a choice among a finite set of work options, where individuals compare the utility of different employment and hours combinations given the opportunities available to them. Preferences are modeled in a random utility framework, while heterogeneity in job availability and constraints is captured through the opportunity structure. This allows the model to account for both choice behavior and limitations in feasible options. We combine this structural labor supply framework with a detailed microsimulation model based on Belgian administrative data, allowing for an accurate mapping from labor supply choices to disposable income and fiscal outcomes.
Read MoreNavigating Trade-offs in German Social Benefit Reform
The current German system of means-tested social benefits, which include citizen’s benefit, housing benefit, and supplementary child benefit, is characterized by high effective marginal tax rates, which are often higher than 90 percent across wide income brackets. As a result, even substantial increases in working hours typically yield small gains in disposable household income. These high effective marginal tax rates apply not only to citizen’s benefit, but also to the housing benefit and supplementary child benefit. Additionally, the coexistence of competing benefits – citizen’s benefit on the one hand, housing benefit and supplementary child benefit on the other – makes the social benefits system complex to navigate for those affected. For these reasons, and against the backdrop of considerable fiscal pressures, there is currently intense political and academic debate about reforming the system.
Read MoreShifting the Tax Burden from Consumption to Income in Croatia: Preserving Efficiency while Reducing Inequality
This paper analyses the distributional effects of a fiscally neutral tax reform in Croatia that shifts the tax burden from consumption to labour income, capital income, and property. Such a reform can be considered justified given the imbalances of the Croatian tax system, which is characterised by an exceptionally high share of indirect taxes and relatively low taxation of labour, capital, and property income compared to the EU average, contributing to regressivity and greater income inequality.
Read MoreTaxing Couples as Singles? A Structural Analysis of Labor Supply for Belgium
Joint taxation of married couples remains a central feature of many income tax systems, with significant implications for labor supply and household welfare. By pooling partners’ incomes into a single tax base, joint filing can create disincentives for secondary earners and generate marriage-related penalties, raising concerns about efficiency and equity. This paper studies the impact of joint taxation on the labor supply of couples in Belgium, where the personal income tax is formally individual but substantially adjusted at the household level. We estimate a Random Utility Random Opportunity (RURO) model of labor supply using rich administrative data linking tax records and demographic information. Using the FANTASI microsimulation model of the Belgian personal income tax, we perform a counterfactual analysis of a shift from joint to individual taxation.
Read MoreThe impact on income and labour supply of the limitation of the unemployment benefit in Belgium
Nearly half of the unemployed persons are excluded from the unemployment benefit system by the re-form which has been gradually implemented since 1 January 2026 in Belgium, particularly those with a long unemployment history. The main feature of the reform is to limit the duration of unemployment benefit payments to a maximum of two years, depending on work experience, instead of unlimited payments in time as in the old system. Further, the progressivity of the benefit scheme has been strengthened by an increase of 10% of the ceiling amount during the six first months of unemployment, and a re-duction to a lump sum for unemployed persons who are entitled to payments after one year of unemployment. This paper gives the ex-ante evaluation results on income and labour supply of this reform. The simulation exercise concludes that approximately one third of the excluded persons are expected to return to work, approximately 40% are predicted to receive the social minimum income. The remaining fourth withdraw from the labour market without replacement income, resulting in a significant loss of disposable revenue. Nonetheless the impact on the poverty rate is moderate. Older unemployed, aged 55 years and over, are particularly affected by the reform as more than three fourth of them lose their benefit, representing nearly 22% of the excluded sample. Regional differences are substantial, with Flanders being the least impacted and Brussels-Capital region the most. To fulfil the evaluation, we use:
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