Labour supply and income distribution effects of the working income tax benefit: a general equilibrium microsimulation analysis

Abstract

In this study we assess the impact of the Working Income Tax Benefit (WITB) on labour supply, GDP and income distribution in Canada, using a general equilibrium microsimulation model. We also estimate labour supply and demand elasticities using survey data to ensure that households' behaviour is properly captured in the model. Simulation results show that the WITB affects particularly labour market participation of low-and medium-skilled lone-parents families. These positive effects on labour supply translate into higher after-tax incomes leading to a decline in low-income rates and low-income gaps. Our findings suggest that enhancing the WITB could provide additional income support to working Canadian families while reducing work disincentives for those trapped behind the welfare wall. JEL classification: C15, D33, D58, J08, I32, O51

Analysing tax-benefit reforms in the Netherlands using structural models and natural experiments

“…The general in-work credit in the Netherlands depends on individual income, and hence stimulates participation of secondary earners. Annabi et al (2013) study the introduction of the Working Income Tax Benefit (WITB) in 2007 in Canada. The WITB substantially reduces effective marginal tax rates for low incomes.…”

Los efectos tributarios en los sectores de la economía colombiana

“…En materia de impuestos corporativos existen diferentes trabajos que se enfocan en cuantificar los efectos de los impuestos sobre las empresas (Annabi et al, 2013;Blesse et al, 2019;Brito-Gaona & Iglesias, 2017;Harju & Matikka, 2016;Koga, 2003;Slemrod & Yitzhaki, 2002;Wallis, 2016).…”

General Equilibrium Effects of Lower Labor Tax Burden in Croatia

“…A CGE simulation is used for assessing the effects of the fl at tax, as shown by Boratyński and Borowski (2012) on the example of Poland. Annabi et al (2013) assess the impact of particular tax benefi t on labor supply, GDP and income distribution in Canada using CGE microsimulation model. At the macro level, results suggest that tax benefi t has modest positive impacts on labor supply and GDP, as well as a decline in low-income rates and income inequality.…”