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Out‐of‐Work Benefits

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Abstract:

The measure of out‐of‐work benefits compares the net income of a person when out of work to that when in work. The main indicator shown here is the net replacement rate, defined as ratio of net household income when the household head is out of work to that it previously enjoyed when its head was employed. Marginal effective tax rates present similar information in a different way, by considering the financial consequences of taking up or increasing the amount of paid work (i.e. they measure the percentage of additional earnings that are "taxed away" through a combination of reduced benefits and higher income taxes). The indicator of effective tax rates shown here refers to a person who has been unemployed for less than 60 months as they re‐enter employment at different earnings levels.

Document Type: Review Article

Publication date: February 1, 2007

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