3784495986

6 Mikroekonomia

BANK I KREDYT styczeń 2008

1. Introduction

lu this paper we conduct a detailed comparison of work iuceutives for a large set of stylised houseliolds betweeu the United Kingdom, Germany and Poland. The tliree couutries may be cousidered as represeuting tliree types of welfare regimes, wliich makes the comparison especially mterestmg. The UK and Germany represeut two developed econoinies with the latter often qnoted as one of the most generons welfare States and with the United Kingdom as au example of a morę liberał economy, with less a generons welfare system. The tax and beuefits Systems iu these two ecouomies, and their effects on inceutives to work, are compared to the system iu Poland, a transition economy and a new member of the EU. The analysis preseuted in this paper shows results geuerated using tliree country-specific static tax and benefit micro-simulation models. respectively: the IFS model for the British system, the STSM model for Germany and the SIMPL model for Poland.¹

Onr analysis anns to demonstrate the usefulness of comparative liiicro-sinnilation work for the purpose of ideutifyiug most important areas for reform relating to autipoverty measures and the labour market. While a large number of stndies have used micro-siumlalioii

models for that purpose (see for example Haau, Myck 2007a; Bargain, Orsiui 2006; and other stndies), so far tliere has been little interuatioual analysis iuclndiug the tax and benefit system iu Poland (a recent exceptiou is Uaan, Myck 2007b) and we are not aware of comparative lnicTO-simulation stndies for the tliree Systems aualysed

While the type of analysis preseuted in this paper is iu sonie sense restrictive, sińce we ouly look at a selected number of stylised families, the approach we take allows for iuteresting direct comparisous betweeu faniily types. Moreover, the set of example families we choose is broad eiiough to give a very good feel of how the tax and benefit Systems in the UK, Germany and Poland affect houseliolds finaucial situation. Onr analysis focnses in particular on workiug-age families in the lower eud of the income distribution. This is because it is this part of the population for wlucli the problems of poverty alleviatiou and provisiou of strong work inceutives are especially relevaut and often difficult to address. Therefore, the analysis of work incentiyes provided below looks at the finaucial situation of the example families assumiug that earners in these families receive either the 10^,h, the 25¹'¹ or the 50^,h percentile wagę. It is not surprising that work inceutives strongly relate to the level of earuings, and - as we shall see iu many cases - the finaucial reward from full-tinie employmeut can be extremely Iow relative to what families may receive when individuals remaiu out of the labour market.

' R»r mora dotaih nlimil llie Pblish model (SIMI’1.) sen Haruain i:t al. (2007). Oe-lails of Ihc ( n »lnl (STSM) | ri I I SI t 1(1005).

The paper is structured as follows, In Section 2 we give an outline of the most important aspects of the tax and beuefits Systems iu the UK, Germany and Poland. Section 3 provides sonie iiiformation about the stylised faiuily types we use for our exercise and about the assumptions we make in the calculatiou of their disposable incomes. Is Section 4 we introduce the way iu which results have been preseuted and define replacemeut ralios (Rks) which are computed for the example families. Discussiou of the details of the budget constraints onr example families would face nuder respective tax and beuefits systeins is preseuted iu Section 5. We focus the discussiou on the key differeuces betweeu the couutries as far as the Systems of meaus-tested beuefits are concerned (Sections 5.1.1 and 5.1.2), on the most problematic elemeuts of the systems leadiug to effective lnargiual tax rates in excess of 100% (Section 5.1.3), and the cousequences of lneaus-testiug on how rapidly net incomes grow with inereasiug work intensity (Section 5.1.4). Ili Section 5.2 we provide a comparison of the liiaiu features of the tax and benefit systems which are targeted on families with children. Financial incentives to work are summarised using RRs iu Section 6, iu which we show how relative attractiveness of work differs betweeu the tliree couutries. We point to major differeuces betweeu the couutries m incentiyes to work for loue pareuts (6.1) and couples (6.2). Using RRs we also stress the importauce of the effect of iu-work support on finaucial attractiveuess for second earners (6.3). Section 7 offers sonie couclusions and lessons from the analysis for tax and benefit policy in Poland.

2. Tax and Benefiłs systems - deductions from employment income and main benefiłs considered in the exercise

Below we describe sonie details of income taxatiou and benefit systems in the UK, Germany and Poland payiug particular attentiou to the beuefits we subsequeutly model in coinputmg disposable incomes for the example families we focus on. The description of income taxation focuses on taxation of earuiugs and iucludes most important details of the persoual income tax and social security aintrihutions system. The beuefits we look at are either uuiyersal child-related beuefits or yarious forms of meaus-tested support which the families we consider could apply for. Iu the case of the UK we also include a description of work related means-tested paynients, the so-called in-work credits. The system for eacli of the countries is described as of 2005. This is the system we use to model finaucial incentiyes of the exainple families in all tliree countries.