The Dutch Tax-Benefit System and Life-Cycle Employment Outcomes and Reform Options

An overlapping-generations model with search unemployment is calibrated for the Netherlands to assess the impact of tax-benefit reforms on labour supply. Several reforms are analysed, in particular the introduction of a flat tax and pension reforms. The model demonstrates the potential of these refo...

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Bibliographic Details
Main Author: Ernst, Ekkehard
Other Authors: Teuber, Timo
Format: eBook
Language:English
Published: Paris OECD Publishing 2008
Series:OECD Economics Department Working Papers
Subjects:
Online Access:
Collection: OECD Books and Papers - Collection details see MPG.ReNa
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520 |a An overlapping-generations model with search unemployment is calibrated for the Netherlands to assess the impact of tax-benefit reforms on labour supply. Several reforms are analysed, in particular the introduction of a flat tax and pension reforms. The model demonstrates the potential of these reforms to raise labour supply. In particular, pension reforms, such as lowering replacement rates for pensioners, help to boost participation rates of older workers. On the other hand, a flat tax would promote longer working hours across the board, thereby rising labour supply. However, the introduction of a flat tax is a costly measure and would increase the primary general government deficit by close to 2% of GDP. Simultaneous measures to lower the structural unemployment rate would not only help to avoid adverse effects of such a tax reform on the fiscal balance but would strengthen further the positive effects of a flat tax on working hours