Preferences and labor supply effects of benefits: the case of income-based Jobseeker’s Allowance
AbstractThe UK income support system offers a guaranteed income level to single adults available for full time work so long as both earnings and hours worked are below a threshold level. In this paper we examine the effects of this on labour supply. We show that the restriction on hours worked is irrelevant to the household choices and will never bind. We then look for conditions on preferences under which it is possible to order households by preferences or the wage in such a way that all claimants are lower in the order. If there is a common wage and preferences satisfy a single crossing condition property there is such an ordering in which the most work averse are claimants. If preferences are common but the wage rates are heterogeneous then if preferences are quasilinear in leisure there is also an ordering with low wage households being claimants. With both wage rate and preferences heterogeneity these restrictions need to be combined to monotonically order the population.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 10/09.
Date of creation: Jun 2010
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unemployments bene?fit; shirkers; labour supply;
Find related papers by JEL classification:
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
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