The Economic Social Research Institute has taken the unprecedented step of withdrawing the working paper that stated that up to 44% of working families with children were better off on the dole.
In a statement this evening, the ESRI said the working paper had been issued as a ''work in progress'' on 22 May.
It was not an ESRI report, it said, and there were serious concerns about the methodologies used in it.
The ESRI said the paper's estimates overstated the number of people who would be better off on the dole.
It said the Institute had taken the unprecedented step of withdrawing the paper because of concern that the public could be misled by its contents.
The Institute said it understood that the lead author, Professor Richard Tol, was engaged in revising the paper.
Prof Tol has told RTÉ News that he stands over the findings.
"The Costs of Working in Ireland" paper factored in the cost of work-related expenses, such as transport, childcare, clothing and lunches.
The research found that working people incur five times the expenses on unemployed people - and that they have to pay those expenses from after-tax income.
A childless worker would need €7,000 a year to cover expenses such as lunches and commuting - working out at €140 per week.
That cost would rise to €9,000 for those with young children.
It notes that up to 30% of a monthly wage can be spent on childcare.
Overall the working paper concludes that a comparison of take-home pay for those working and on welfare shows that work does not pay for 1% of the population.
However, a comparison of take-home pay plus extra expenditures shows that 15% of people without children and 44% of those with children are better off not working.
The findings - if correct - would discourage significant numbers of the 430,000 on the Live Register from taking jobs and make it harder for the Government to tackle the jobless crisis.
The working paper was co-authored by Niamh Crilly, Anne Pentecost and Richard Tol.
It earlier said the final report is expected to show lower numbers who would benefit from staying on social welfare.
Earlier, ESRI Director Professor Frances Ruane had said when asked if she had contact with the Government, that she was sure they were upset.
She continued, neither the Government nor the ESRI would want numbers "floating around" that could be totally at variance with what the reality is.
'Financial incentive' to work
In response, the Department of Social Protection stressed that the great majority of people on the Live Register had a significant financial incentive to work.
The department said that of the 429,255 people signing on the Live Register in May, around 289,000 or 67% had a total social welfare income of €188 per week or less.
It notes that people on the Live Register may also qualify for other payments but said these were a small minority - with 43,600 (10.1%) getting Rent Supplement and 10,400 (2.4%) getting Mortgage Interest Supplement.
However, it noted that those people with dependents and people getting rent or mortgage interest supplement were least likely to leave the Live Register.
It says that long-term unemployment remains high, but says that for many unemployed people it is a short-term experience - with 143,079 leaving the Live Register in the year to April 2012.