This study investigates how the connection of taxation to public benefits can decrease tax payers' perceived tax burden, affecting their labor-leisure decision. We present a model of tax and benefit (mis)-perception, in which payoff maximizing work effort increases when the perceived tax burden decreases. Increasing the salience of benefits funded by taxation and the probability of receiving them decreases this perceived tax burden. We use two real-effort online experiments to test the suppositions of the model. In a flat tax system, we find that lack of information on the accrual of benefits increases perceived tax burden and decreases labor supply. In a progressive tax system, we find that full benefit salience improves motivation to remain in the unemployment insurance system and that effort increases under benefit salience when the unemployment rate is high. As such, behavioral responses to the salience of benefits also requires the expectation of their need.

Immigrants’ access to welfare benefits and public services is central to immigration policy debates, yet credible evidence on how eligibility affects labor supply remains limited. We study this question using a natural experiment, where Ukrainian refugees unexpectedly became eligible for a broad set of welfare benefits and public services after 12 months of residence in Finland. Using high-frequency administrative data, we compare monthly employment and earnings trajectories of Ukrainian refugees to similar migrants whose welfare eligibility was unaffected. We find substantial but incomplete take-up of benefits but a decline in labor supply after eligibility: employment falls by about 4 percentage points and earnings by 13 percent in the first year. For refugees with children, access to childcare services increases labor supply relative to non-parents. Exploiting regional variation in coverage, we show that early access to immigrant training mitigates employment losses, although part of the short-run decline reflects full-time language-training enrollment.

This paper examines the effectiveness of Minimum Income Schemes (MIS) across EU-27 countries during the high inflation period of 2021-2024. Using microsimulation techniques, we analyse how well MIS parameters kept pace with inflation and assess their capacity to protect vulnerable households from monetary poverty. Our results suggest that countries with automatic indexation mechanisms demonstrate superior poverty outcomes with respect to those lacking formal indexation mechanisms or implementing insufficient adjustments. Moreover, in some countries MIS seem able to mitigate a large part of the increase in poverty rates, while in others they have a limited potential to do so, even with optimal indexation conditions. This work demonstrates that the interaction between indexation mechanisms and underlying design features, such as coverage, generosity and eligibility criteria, fundamentally shapes the schemes’ distributional outcomes.