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Workfare in an efficiency wage model

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  • Volker Meier

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Abstract

The impacts of introducing work requirements for welfare recipients are studied in an efficiency wage model. If the workfare package is not mandatory, it will reduce employment, profits, and utility levels of employed and unemployed workers. In contrast, mandatory effort requirements will generally raise both employment and profits and reduce the tax rate. The impact on the net wage is ambiguous. Changes of utility levels of employed and unemployed workers have the same sign as the variation in the net wage. The possibility of a Pareto improvement may explain the widespread support for welfare to work experiments.

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File URL: http://hdl.handle.net/10.1007/s10663-007-9055-y
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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 35 (2008)
Issue (Month): 2 (April)
Pages: 165-178

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Handle: RePEc:kap:empiri:v:35:y:2008:i:2:p:165-178

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

Keywords: Workfare; Welfare; Efficiency wages; H53; J41; J60;

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References

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  1. Robert A. Moffitt, 2003. "The Temporary Assistance for Needy Families Program," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 291-364 National Bureau of Economic Research, Inc.
  2. Robert Moffitt, 1999. "Explaining Welfare Reform: Public Choice and the Labor Market," International Tax and Public Finance, Springer, vol. 6(3), pages 289-315, August.
  3. 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.
  4. Katherine Cuff, 2000. "Optimality of workfare with heterogeneous preferences," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 149-174, February.
  5. Peter Fredriksson & Bertil Holmlund, 2003. "Optimal Unemployment Insurance Design: Time Limits, Monitoring, or Workfare?," CESifo Working Paper Series 1019, CESifo Group Munich.
  6. Besley, Timothy & Coate, Stephen, 1995. "The Design of Income Maintenance Programmes," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 187-221, April.
  7. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
  8. 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.
  9. Chambers, Robert G., 1989. "Workfare or welfare?," Journal of Public Economics, Elsevier, vol. 40(1), pages 79-97, October.
  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. 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.
  12. Dye, Ronald A. & Antle, Rick, 1986. "Cost-minimizing welfare programs," Journal of Public Economics, Elsevier, vol. 30(2), pages 259-265, July.
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Cited by:
  1. Christian Holzner & Volker Meier & Martin Werding, 2006. "Workfare, Monitoring, and Efficiency Wages," CESifo Working Paper Series 1749, CESifo Group Munich.

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