Taxes, Benefits and Labour Market Responses: New Evidence for Ireland

Abstract

Three main goals are achieved in this study.Estimates are provided of how strongly the labour supply of Irish married couples is linked to the financial rewards from work, based on best practice techniques from the international literature.Building on these estimates, the study shows how the labour supply implications of tax and welfare policy changes can be assessed in much greater depth than has been possible to date.Empirical estimates are provided, again based on best practice techniques, of the extent to which the durations of spells of unemployment are influenced by the balance between in-work and out-of-work incomes, as summarised by either the replacement rate (out-of-work income divided by in-work income) or the cash gap between in-work and out-of-work income.The conclusions draw out some wider implications and identify areas where further research, building on the base provided by the present study, seems likely to be fruitful.