Behavioural Microsimulation of In-Work: Benefits with Discrete Labour Supply

Resumen
- In-Work Benefits (IWB) have become very common transfer programs as a tool aimed at gathering both efficiency and equity targets. An expanding literature has assessed the effects of these policies on the income distribution and the labour supply. In this paper, we estimate the redistributive impact of a simulated IWB in Spain based on the replacement of the existing working mother tax credit. We simulate the redistributive effects of this proposal using EUROMOD and a discrete choice model of labour supply. Our results show that the enhancement of the proposed IWB would yield significant and positive effects in terms of inequality and poverty reductions without creating substantial labour disincentives.