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Workfare, monitoring, and efficiency wages

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Author Info

  • Holzner, Christian
  • Meier, Volker
  • Werding, Martin

Abstract

The impact of a stronger work requirement for welfare recipients in a workfare program is studied in an efficiency wage model where a representative firm chooses its level of monitoring activities. A stricter workfare policy raises employment as well as the monitoring intensity. It typically increases profits and reduces the tax rate. The impact on the net wage is ambiguous. Utility levels of employed workers and welfare recipients may increase even if the net wage declines. The utility differential between these two groups of workers shrinks.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 157-168

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:157-168

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Web page: http://www.elsevier.com/locate/inca/622617

Related research

Keywords: Workfare Welfare Efficiency wages Monitoring;

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References

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  1. Robert Haveman & Barbara Wolfe, 2000. "Welfare to Work in the U.S.: A Model for Other Developed Nations?," International Tax and Public Finance, Springer, vol. 7(1), pages 95-114, February.
  2. Volker Meier, 2002. "Workfare in an Efficiency Wage Model," CESifo Working Paper Series 674, CESifo Group Munich.
  3. Robert Moffitt, 2002. "The Temporary Assistance for Needy Families Program," NBER Working Papers 8749, National Bureau of Economic Research, Inc.
  4. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
  5. Brett, Craig, 1998. "Who Should Be on Workfare? The Use of Work Requirements as Part of an Optimal Tax Mix," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 607-22, October.
  6. Katherine Cuff, 1998. "Optimality of Workfare with Heterogeneous Preferences," Working Papers 968, Queen's University, Department of Economics.
  7. Peter Fredriksson & Bertil Holmlund, 2003. "Optimal Unemployment Insurance Design: Time Limits, Monitoring, or Workfare?," CESifo Working Paper Series 1019, CESifo Group Munich.
  8. Peck, Jamie & Theodore, Nikolas, 2000. "Commentary: 'Work First': Workfare and the Regulation of Contingent Labour Markets," Cambridge Journal of Economics, Oxford University Press, vol. 24(1), pages 119-38, January.
  9. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-61, March.
  10. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  11. Dye, Ronald A. & Antle, Rick, 1986. "Cost-minimizing welfare programs," Journal of Public Economics, Elsevier, vol. 30(2), pages 259-265, July.
  12. R. A. Moffitt, . "Explaining Welfare Reform: Public Choice and the Labor Market," Institute for Research on Poverty Discussion Papers 1195-99, University of Wisconsin Institute for Research on Poverty.
  13. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  14. Besley, T. & Coate, S., 1991. "The Design Of Income Maintenance Programs," Papers 74, Princeton, Woodrow Wilson School - John M. Olin Program.
  15. Claus Thustrup Kreiner & Torben Tranas, 2005. "Optimal Workfare with Voluntary and Involuntary Unemployment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(3), pages 459-474, 09.
  16. Ronnie Schöb, 2003. "Workfare and Trade Unions: Labor Market Repercussions of Welfare Reform," CESifo Working Paper Series 942, CESifo Group Munich.
  17. Torben M. Andersen & Michael Svarer, 2014. "The Role of Workfare in Striking a Balance between Incentives and Insurance in the Labour Market," Economica, London School of Economics and Political Science, vol. 81(321), pages 86-116, 01.
  18. Chambers, Robert G., 1989. "Workfare or welfare?," Journal of Public Economics, Elsevier, vol. 40(1), pages 79-97, October.
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Citations

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Cited by:
  1. Torben Andersen & Michael Svarer, 2008. "The Role of Workfare in Striking a Balance between Incentives and Insurance in the Labour Market," CESifo Working Paper Series 2267, CESifo Group Munich.
  2. Andersen, Torben M, 2012. "Migration, Redistribution and the Universal Welfare Model," IZA Discussion Papers 6665, Institute for the Study of Labor (IZA).
  3. Heijdra, B.J. & Ligthart, J.E., 2005. "Fiscal Policy, Monopolistic Competition and Finite Lives," Discussion Paper 2005-126, Tilburg University, Center for Economic Research.
  4. Torben Andersen, 2010. "Why do Scandinavians Work?," CESifo Working Paper Series 3068, CESifo Group Munich.

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