Optimal income support for lone parents in the Netherlands: are we there yet?

The Netherlands witnessed major reforms in income support for lone parents over the past decade, to simplify the support system and to improve the financial incentives to work. We consider whether the new system can be considered closer to 'optimal', using the inverse-optimal tax(ation) method. In our base model we find social welfare weights that were not monotonically declining in income before the reforms. The reforms fixed this anomaly for the group of lone parents as a whole, but the anomaly remains for lone parents with a child 0–3 years old. For a wide range of redistributive preferences we find that subsidies for working lone parents could be increased further. [ABSTRACT FROM AUTHOR]