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Hypothetical tax-benefit reforms in Hungary

Working Paper 2023-648

Abstract

This paper evaluates two hypothetical budget-neutral reforms that shift resources from family tax expenditures to family cash transfers. We evaluate these reforms using a structural labor supply model based on the microsimulation EUROMOD model and EU-SILC data. We find that both reforms have an inequality-decreasing impact. However, when looking at labor supply responses for different household types, we show that the reforms have a non-negligible impact, especially for females in couple households. Additionally, we show that females in the middle of the income distribution in particular will reduce labor supply in response to the reforms.

Authors: Michael Christl, Ana AgΓΊndez GarcΓ­a.

Keywords: family benefits, reform, labor supply, discrete choice, microsimulation, EUROMOD
JEL: J20, J08, H31