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On the Dark Side of Welfare: Estimation of Welfare Recipients Labor Supply and Fraud

Author

Listed:
  • Dmitri Romanov
  • Noam Zussman

    (Bank of Israel)

Abstract

The paper suggests a novel analytical and empirical framework for exploring labor market behavior and fraud among welfare recipients. First, cheating is introduced in the form of concealing information from social security authorities. Second, the relevance of working hours constraints is tested. Third, we study labor supply as well as participation decisions. Fourth, the model includes estimation of the labor supply decision under uncertainty, subject to a non-linear budget set. We find that when individual decisions involve illegitimate actions such as fraudulent collection of welfare benefits, immoral aspects are perceived as separable from the economic consequences of these actions. In addition, working hours constraints do provide obstacles to welfare recipients’ labor market participation.

Suggested Citation

  • Dmitri Romanov & Noam Zussman, 2001. "On the Dark Side of Welfare: Estimation of Welfare Recipients Labor Supply and Fraud," Bank of Israel Working Papers 2001.12, Bank of Israel.
    • Handle: RePEc:boi:wpaper:2001.12
    as

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    File URL: https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2001.12.pdf
    File Function: First version, 2001
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    References listed on IDEAS

    as
    1. Greenberg, David & Moffitt, Robert & Friedmann, John, 1981. "Underreporting and Experimental Effects on Work Effort: Evidence from the Gary Income Maintenance Experiment," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 581-589, November.
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