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Employment Effects of Welfare Reforms: Evidence from a Dynamic Structural Life-Cycle Model

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Author Info
Haan, Peter () (DIW Berlin)
Prowse, Victoria L. () (University of Oxford)
Uhlendorff, Arne () (IZA)

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Abstract

In this paper we develop a dynamic structural life-cycle model of labor supply behavior which fully accounts for the effect of income tax and transfers on labor supply incentives. Additionally, the model recognizes the demand side driven rationing risk that might prevent individuals from realizing their optimal labor supply state, resulting in involuntary unemployment. We use this framework to study the employment effects of transforming a traditional welfare state, as is currently in place in Germany, towards a more Anglo-American system in which a large proportion of transfers are paid to the working poor.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3480.

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Length: 48 pages
Date of creation: May 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3480

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Related research
Keywords: life-cycle labor supply; involuntary unemployment; in-work credits;

Other versions of this item:

Find related papers by JEL classification:
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

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  5. Adda, Jérôme & Costa Dias, Mònica & Meghir, Costas & Sianesi, Barbara, 2007. "Labour market programmes and labour market outcomes: a study of the Swedish active labour market interventions," Working Paper Series 2007:27, IFAU - Institute for Labour Market Policy Evaluation. [Downloadable!]
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    Other versions:
  13. James P. Ziliak & Thomas J. Kniesner, 1999. "Estimating Life Cycle Labor Supply Tax Effects," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 326-359, April. [Downloadable!] (restricted)
    Other versions:
  14. Arjan Heyma, 2004. "A structural dynamic analysis of retirement behaviour in the Netherlands," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(6), pages 739-759. [Downloadable!]
  15. David Card & Philip K. Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project," NBER Working Papers 5701, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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    Other versions:
  18. van der Klaauw, Wilbert, 1996. "Female Labour Supply and Marital Status Decisions: A Life-Cycle Model," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 199-235, April. [Downloadable!] (restricted)
    Other versions:
  19. Kimmel, Jean & Kniesner, Thomas J., 1998. "New evidence on labor supply:: Employment versus hours elasticities by sex and marital status," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 289-301, July. [Downloadable!] (restricted)
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    Other versions:
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