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Workfare, Monitoring, and Efficiency Wages

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  • Christian Holzner

    ()

  • Volker Meier

    ()

  • Martin Werding

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 and monitoring activities. It typically increases profits and reduces the tax rate. The impact on the net wage isambiguous. 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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2006/wp-cesifo-2006-06/cesifo1_wp1749.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1749.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1749

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Keywords: workfare; welfare; efficiency wages; monitoring;

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References

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  1. Volker Meier, 2002. "Workfare in an Efficiency Wage Model," CESifo Working Paper Series 674, CESifo Group Munich.
  2. Katherine Cuff, 2000. "Optimality of workfare with heterogeneous preferences," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 149-174, February.
  3. 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.
  4. Chambers, Robert G., 1989. "Workfare or welfare?," Journal of Public Economics, Elsevier, vol. 40(1), pages 79-97, October.
  5. Besley, T. & Coate, S., 1991. "The Design Of Income Maintenance Programs," Papers 74, Princeton, Woodrow Wilson School - John M. Olin Program.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  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. Robert Moffitt, 2002. "The Temporary Assistance for Needy Families Program," NBER Working Papers 8749, National Bureau of Economic Research, Inc.
  13. Ronnie Schöb, 2003. "Workfare and Trade Unions: Labor Market Repercussions of Welfare Reform," CESifo Working Paper Series 942, CESifo Group Munich.
  14. 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.
  15. 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.
  16. Fredriksson, Peter & Holmlund, Bertil, 2005. "Optimal unemployment insurance design: time limits, monitoring, or workfare?," Working Paper Series 2005:13, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  17. Dye, Ronald A. & Antle, Rick, 1986. "Cost-minimizing welfare programs," Journal of Public Economics, Elsevier, vol. 30(2), pages 259-265, July.
  18. 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.
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Citations

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Cited by:
  1. Torben M. Andersen & Michael Svarer, 2008. "The role of workfare in striking a balance between incentives and insurance in the labour market," Economics Working Papers 2008-05, School of Economics and Management, University of Aarhus.
  2. Heijdra, B.J. & Ligthart, J.E., 2006. "Fiscal Policy, Monopolistic Competition and Finite Lives," Open Access publications from Tilburg University urn:nbn:nl:ui:12-199395, Tilburg University.
  3. Torben Andersen, 2010. "Why do Scandinavians Work?," CESifo Working Paper Series 3068, CESifo Group Munich.
  4. Andersen, Torben M, 2012. "Migration, Redistribution and the Universal Welfare Model," IZA Discussion Papers 6665, Institute for the Study of Labor (IZA).

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