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Employment effects of welfare reforms - Evidence from a dynamic structural life-cycle model

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  • Victoria Prowse
  • Peter Haan

Abstract

In this paper we develop a dynamic structural life-cycle model of labor supply behavior which fully accounts for the effects 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 traditonal 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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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 391.

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Date of creation: 01 Apr 2008
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Handle: RePEc:oxf:wpaper:391

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Keywords: Life-Cycle Labor Supply; Involuntary Unemployment; In-Work Credits;

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Cited by:
  1. Peter Haan & Victoria Prowse, 2010. "A structural approach to estimating the effect of taxation on the labour market dynamics of older workers," Econometrics Journal, Royal Economic Society, vol. 13(3), pages S99-S125, October.

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