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Workfare, monitoring, and efficiency wages

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  • 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.

Suggested Citation

  • Holzner, Christian & Meier, Volker & Werding, Martin, 2010. "Workfare, monitoring, and efficiency wages," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 157-168, March.
    • Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:157-168
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    1. 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, January.
    2. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    3. Robin Boadway, 2011. "Viewpoint: Innovations in the theory and practice of redistribution policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(4), pages 1138-1183, November.
    4. Torben Andersen, 2010. "Why do Scandinavians Work?," CESifo Working Paper Series 3068, CESifo.
    5. Andersen, Torben M., 2012. "Migration, Redistribution and the Universal Welfare Model," IZA Discussion Papers 6665, Institute of Labor Economics (IZA).
    6. Wu Joseph S. K. & Ho Chi Pui, 2017. "The Shapiro-Stiglitz Model with Non-constant Marginal Utility," Open Economics, De Gruyter, vol. 1(1), pages 36-48, August.

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    More about this item

    Keywords

    Workfare Welfare Efficiency wages Monitoring;

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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