Is Belgium "Making Work Pay" ?

In the period 2001-2004 two major reforms followed in Belgium: a personal income tax reform which included a new tax credit on low earnings (2001) and a reform of social security contributions for low wage employees (2004). Using a discrete hours labor supply model, this paper assesses the impact of these reforms on aggregate labor supply of couples. Results suggest that the reforms had a positive (but moderate) effect on both participation and hours worked. Targeted reductions in social security contributions, nevertheless, proved to be more effective in stimulating aggregate labour supply, w... Mehr ...