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Are The Unemployed And Inactive Financially Trapped? Evidence From Serbia
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Are The Unemployed And Inactive Financially Trapped? Evidence From Serbia

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  • Aleksandra Anić
  • Gorana Krstić

Abstract

The aim of this paper is to explore if the unemployed and inactive but able to work individuals in Serbia are incentivized to work or to live dependent on the safety net. Following OECD methodology, we calculate the net replacement rate, defined as the ratio of net income out of work to net income in work. We use 2014 Survey of Income and Living Conditions microdata to calculate and analyse the net replacement rate. Since wages for the unemployed and inactive are not observed, we estimate them, taking into account selection effects (Bourguignon, Fournier, & Gurgand, 2007). Our results suggest a number of interesting findings. First, neither unemployed nor inactive are financially trapped, since the net replacement rate is 55.5% for the unemployed and 59.1% for the inactive, on average. Second, those receiving monetary social assistance and/or child allowance (the two main cash benefit programmes to help poor families) do have incentives to work. Finally, our analysis of the net replacement rate by different individual and household characteristics indicates that the benefit system in Serbia does not provide a disincentive to work.

Suggested Citation

  • Aleksandra Anić & Gorana Krstić, 2017. "Are The Unemployed And Inactive Financially Trapped? Evidence From Serbia," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(214), pages 87-106, June - Se.
    • Handle: RePEc:beo:journl:v:62:y:2017:i:214:p:87-106
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    References listed on IDEAS

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    1. Pedersen, Peder J. & Smith, Nina, 2001. "Unemployment Traps: Do Financial Disincentives Matter?," IZA Discussion Papers 274, Institute of Labor Economics (IZA).
    2. Aino Salomäki & Teresa Munzi, 1999. "Net Replacement Rates of the Unemployed. Comparison of various approaches," European Economy - Economic Papers 2008 - 2015 133, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Löffler, Max & Peichl, Andreas & Siegloch, Sebastian, 2013. "Validating Structural Labor Supply Models," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79819, Verein für Socialpolitik / German Economic Association.
    4. François Bourguignon & Martin Fournier & Marc Gurgand, 2007. "Selection Bias Corrections Based On The Multinomial Logit Model: Monte Carlo Comparisons," Journal of Economic Surveys, Wiley Blackwell, vol. 21(1), pages 174-205, February.
    5. Giuseppe Carone & Herwig Immervoll & Dominique Paturot & Aino Salomäki, 2004. "Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes," OECD Social, Employment and Migration Working Papers 18, OECD Publishing.
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    More about this item

    Keywords

    net replacement rate; work incentives; unemployment trap; inactivity trap; Serbia;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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