Discuss the disincentives on work effort induced by the tax and benefit system, and how the theory of labor supply offers alternative systems to minimize these disincentives

Type :

Term papers

Pages :

7 pages

Format :

.doc

Published date :

05/12/2009

Category :

Economics & finance

Sub category :

Economics

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Summary :

Introduction
The theory of labor supply
Effects of the tax and benefit system on work effort: concrete cases
1. Definition
2. Consequences on welfare gains
3. Labor supply responses
4. Consequences on employment
5. Consequences on poverty
Conclusion
Bibliography

Abstract

In the UK, USA or in France, Government is seen from different angles. A State has duties and functions. In order to look after the welfare of their citizens, it tries to improve the reputation through taxation and benefit system. The main problem for most countries is the unemployment. Few countries give advantage to citizens who work, i.e. it give money by compensating the loss of leisure. In this paper, I shall try to discuss about the disincentives on work effort induced by the tax and the benefit system, and how the theory of labor supplies offers alternative systems to minimize these disincentives. The tax and benefit system are specific for each country but the needs are different. Is the tax system better than the benefit system in terms of improving work effort? how can individuals choose between work and unemployment? What can be the advantages to stay at home? Do the tax and benefit system have an important place in the incentives on work effort? Why individuals put effort to work if they have the choice to stay at home and get benefit system? First of all, the introduction of the theory of labor supply would help us to understand the behavior of individuals, and their incentive to decide if they want to work. Afterwards it would be logical to check if the theory could be realistic.