Can in-work benefits improve social inclusion in the Southern European countries?

This paper analyses the effects of implementing a family-based and an individual in-work benefit in the southern European countries using EUROMOD, the EU-wide tax-benefit microsimulation model. In-work benefits are means-tested cash transfers given to individuals, through the tax system, conditional on their employment status. They are intended to enhance the incentives to accept work and redistribute resources to low income groups. The family-based in-work benefits seem to be more redistributive, in particular in Italy and Portugal, but the presence of extended families does not enable such policies to be well targeted on the very poorest, especially in Spain. Individual policies lead to better incentives to work than family-based in-work benefits, in particular for Spanish and Italian women in couples whose labour market participation is far below the European average.