Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 107: From Welfare to Work: Evaluating a Proposed Tax and Benefit Reform Targeted at Single Mothers in Sweden

Lennart Flood, Elina Pylkkänen and Roger Wahlberg ()
Additional contact information
Lennart Flood: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Elina Pylkkänen: Ministry of Finance, Postal: SE-103 33 Stockholm,
Roger Wahlberg: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG

Abstract: In this paper we propose a tax and benefit reform to increase the working hours and to decrease the welfare participation of single mothers in Sweden. We have access to high-quality tax and income data, and use a detailed tax-benefit program to generate precise budget-sets. We formulate and estimate a structural, static model of labor supply and welfare participation. The results suggest that labor supply among single mother households in Sweden is quite elastic, and that there is self-selection into welfare. The proposed reform would generate welfare-gains for virtually everyone in the sample, yet would be revenue neutral.

Keywords: Single mothers; Labor supply; Welfare participation; Tax and benefit reform

JEL-codes: I38; J22

43 pages, September 26, 2003

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