From Welfare to Work: Evaluating a Tax and Benefit Reform Targeted at Single Mothers in Sweden

Abstract. In this paper we evaluate a hypothetical tax and benefit reform to increase the working hours and to decrease welfare participation of single mothers in Sweden. We formulate and estimate simultaneously a structural static model of labor supply and welfare participation. The results suggest that labor supply among single mother households in Sweden is quite elastic, and that there is self‐selection into welfare. We also find that the proposed reform would generate welfare gains for virtually everyone in the sample, benefit low‐income households, and would at the same time generate a small revenue surplus.