Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/233334 
Year of Publication: 
2018
Series/Report no.: 
Discussion paper No. 119
Publisher: 
Aboa Centre for Economics (ACE), Turku
Abstract: 
This paper analyses financial incentives to work in Finland from three perspectives. First, the financial incentives to work are quantified i.e. the participation tax rate (PTR) levels are calculated with numerous classifications. Second, a question of how different parts of the tax and social security system affect work incentives is answered; the PTR is decomposed so that the quantitative contribution of different tax and social security components is given. Third, subgroup decomposition method is applied to explain how variation in PTR is explained by various characteristics of individuals. We found that taxation and unemployment benefits account the largest shares of the mean PTR. Another finding is that PTRs vary substantially and the benefit side and length of unemployment explain this variation quite well. However, the majority of the variation cannot be explained.
Subjects: 
microsimulation
work incentives
labor supply
taxes
benefits
JEL: 
H24
J22
J31
J65
Document Type: 
Working Paper

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