Income Distribution Effects of a Finnish Work Incentive Trap Reform

The present study concentrates on the income distribution effects of A Finnish Work Incentive Trap Reform started in 1996. I estimate how the reforms made have affected income levels and income inequality - the distribution of economic wellbeing. I look at the effects both without and with behavioral response. The data used is the Income Distribution Statistics of Statistics Finland from the years 1996 and 1998. The empirical part of the study is based on a microsimulation model. The method of microsimulation is a powerful tool for the analysis of ex post evaluation of policy reforms. However, the method is rarely and on very few occasions applied in Finland. The results drawn without behavioral response show that the 1996 data with the 1998 legislation produces lower values for income inequality measures and higher average income levels for almost all income decile groups compared to those with the 1996 legislation. However, the changes are very small. When the labor supply effect is included, the lowest incomes rise only very little (in fact, hardly at all) and the Gini coefficient remains unaltered.Work Incentive Trap Reforms, Microsimulation, Disposable Income, Economic Well-Being, Inequality, Poverty

What works to mitigate and reduce relative (and absolute) inequality? A systematic review

Over the past two decades, research on the impacts of a diverse range of public policies and income inequality has seen rapid growth. Despite the large number of publications to date, there remain important lacunae in our understanding of how policy interventions might help to reduce income inequality. This paper aims to fill this void by providing a systematic literature review of 270 publications that examine four key policy areas: (1) tax policy, (2) social benefits, (3) labour market interventions, and (4) education policy. We describe patterns of empirical findings and implications drawn from the reviewed publications. The strengths and weaknesses of the existing literature are also discussed, along with potential future research avenues.This publication was supported by the Novo Nordisk Foundation Grant NNF19SA006007

Income Distribution Effects of a Finnish Work Incentive Trap Reform

The present study concentrates on the income distribution effects of A Finnish Work Incentive Trap Reform started in 1996. I estimate how the reforms made have affected income levels and income inequality- the distribution of economic wellbeing. I look at the effects both without and with behavioral response. The data used is the Income Distribution Statistics of Statistics Finland from the years 1996 and 1998. The empirical part of the study is based on a microsimulation model. The method of microsimulation is a powerful tool for the analysis of ex post evaluation of policy reforms. However, the method is rarely and on very few occasions applied in Finland. The results drawn without behavioral response show that the 1996 data with the 1998 legislation produces lower values for income inequality measures and higher average income levels for almost all income decile groups compared to those with the 1996 legislation. However, the changes are very small. When the labor supply effect is included, the lowest incomes rise only very little (in fact, hardly at all) and the Gini coefficient remains unaltered. Keywords