{
  "title": "Tax Reform, Subsidies, and Labor Supply: Lessons from Türkiye",
  "publication": "IMF Working Papers, September 19, 2025",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2025/09/19/tax-reform-subsidies-and-labor-supply-lessons-from-trkiye-570548",
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  "summary": "Despite recent progress, Türkiye’s low labor force participation (LFP) rate is macrocritical and stands out internationally. This paper examines two channels through which fiscal policy can affect LFP.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Paper examines two fiscal-policy channels affecting Türkiye’s labor force participation (LFP):\n  - Estimation of the impact of Türkiye’s 2022 Minimum Living Allowance reform, which removed tax disadvantages faced by secondary earners.\n  - Simulation of the impact of conditional subsidies on Türkiye’s LFP.\n- Analysis based on four empirical models estimated for Türkiye using labor force survey micro data."
    },
    {
      "heading": "Methods",
      "content": "- Four empirical models estimated using labor force survey micro data for Türkiye.\n- Two-pronged approach:\n  - Quasi-experimental estimation of the 2022 Minimum Living Allowance reform’s impact on labor supply of primary and secondary earners.\n  - Policy simulation of conditional childcare subsidies and comparison with direct transfers."
    },
    {
      "heading": "Key Findings",
      "content": "- Reform effects:\n  - Turkish secondary earners increased their labor supply by more than primary earners following the removal of tax disadvantages in the 2022 reform.\n- Subsidy simulations:\n  - Conditional childcare subsidies lead to a large increase in LFP at relatively low fiscal costs.\n  - Conditional subsidies can achieve better labor market outcomes and further reduce fiscal costs compared to direct transfers."
    },
    {
      "heading": "Policy Implications and Recommendations",
      "content": "- Removing tax disadvantages for secondary earners can raise labor supply, with larger responses among secondary earners than primary earners.\n- Implementing conditional childcare subsidies is an effective policy lever to raise women’s LFP:\n  - Conditional subsidies generate large LFP gains at relatively low fiscal cost.\n  - Conditional subsidies outperform unconditional direct transfers on labor market outcomes and fiscal efficiency.\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2025/09/19/tax-reform-subsidies-and-labor-supply-lessons-from-trkiye-570548"
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    "Authors: Silvia Domit, Yomna Gaafar, Duncan MacDonald, Carolina Osorio-Buitron",
    "Published: September 19, 2025",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9798229025591.001",
    "Paper examines two fiscal-policy channels affecting Türkiye’s labor force participation (LFP):",
    "Analysis based on four empirical models estimated for Türkiye using labor force survey micro data.",
    "Four empirical models estimated using labor force survey micro data for Türkiye.",
    "Two-pronged approach:",
    "Reform effects:",
    "Subsidy simulations:",
    "Removing tax disadvantages for secondary earners can raise labor supply, with larger responses among secondary earners than primary earners.",
    "Implementing conditional childcare subsidies is an effective policy lever to raise women’s LFP:",
    "**Working Paper**"
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