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

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Author Info
Peter Haan
Victoria Prowse
Arne Uhlendorff

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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 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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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: 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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Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models
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

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  3. 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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  9. 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)
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  10. 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!]
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  12. 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)
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  13. 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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