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Time Limits on Welfare Use under Involuntary Unemployment

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  • Christian Holzner
  • Volker Meier

    ()

  • Martin Werding

Abstract

The impacts of introducing or tightening time limits on welfare use are studied in an efficiency wage model. Those losing access to regular benefits receive some smaller benefit, which can be interpreted as food stamps. Stricter time limits raise both employment and profits and generally reduce the tax rate. The impact on the net wage is ambiguous. Changes of utility levels of employed workers and recipients of regular social assistance have the same sign as the variation in the net wage. The utility differential between social assistance recipients and food stamp participants shrinks.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1220.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1220

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Keywords: welfare benefits; time limits; efficiency wages;

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  1. Fredriksson, Peter & Holmlund, Bertil, 2001. "Optimal Unemployment Insurance in Search Equilibrium," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 370-99, April.
  2. Hassler, John & Rodriguez Mora, José V., 2002. "Should UI Benefits Really Fall Over Time?," IZA Discussion Papers 622, Institute for the Study of Labor (IZA).
  3. Hopenhayn, H. & Nicolini, P.J., 1996. "Optimal Unemployment Insurance," RCER Working Papers 421, University of Rochester - Center for Economic Research (RCER).
  4. Robert Moffitt, 2001. "The Temporary Assistance for Needy Families Program," Economics Working Paper Archive 463, The Johns Hopkins University,Department of Economics.
  5. Steven Shavell & Laurence Weiss, 1978. "The Optimal Payment of Unemployment Insurance Benefits over Time," Cowles Foundation Discussion Papers 503, Cowles Foundation for Research in Economics, Yale University.
  6. Cahuc, Pierre & Lehmann, Etienne, 2000. "Should unemployment benefits decrease with the unemployment spell?," Journal of Public Economics, Elsevier, vol. 77(1), pages 135-153, July.
  7. James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
  8. 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.
  9. Maury Gittleman, 1999. "Time Limits On Welfare Receipt," Contemporary Economic Policy, Western Economic Association International, vol. 17(2), pages 199-209, 04.
  10. Arulampalam, Wiji & Stewart, Mark B, 1995. "The Determinants of Individual Unemployment Durations in an Era of High Unemployment," Economic Journal, Royal Economic Society, vol. 105(429), pages 321-32, March.
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