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Workfare, monitoring, and efficiency wages

  • Holzner, Christian
  • Meier, Volker
  • Werding, Martin

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 as well as the monitoring intensity. It typically increases profits and reduces the tax rate. The impact on the net wage is ambiguous. 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.sciencedirect.com/science/article/pii/S0164-0704(09)00042-1
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 32 (2010)
Issue (Month): 1 (March)
Pages: 157-168

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Handle: RePEc:eee:jmacro:v:32:y:2010:i:1:p:157-168
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  1. Katherine Cuff, 1998. "Optimality of Workfare with Heterogeneous Preferences," Working Papers 968, Queen's University, Department of Economics.
  2. 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.
  3. Timothy Besley & Stephen Coate, 1995. "The Design of Income Maintenance Programmes," Review of Economic Studies, Oxford University Press, vol. 62(2), pages 187-221.
  4. Peter Fredriksson & Bertil Holmlund, 2006. "Optimal unemployment insurance design: Time limits, monitoring, or workfare?," International Tax and Public Finance, Springer, vol. 13(5), pages 565-585, September.
  5. 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.
  6. Torben M. Andersen & Michael Svarer, 2014. "The Role of Workfare in Striking a Balance between Incentives and Insurance in the Labour Market," Economica, London School of Economics and Political Science, vol. 81(321), pages 86-116, 01.
  7. 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.
  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. Meier, Volker, 2008. "Workfare in an efficiency wage model," Munich Reprints in Economics 19183, University of Munich, Department of Economics.
  10. 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.
  11. Claus Thustrup Kreiner & Torben Tranæs, 2003. "Optimal Workfare with Voluntary and Involuntary Unemployment," EPRU Working Paper Series 03-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Aug 2004.
  12. 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.
  13. Ronnie Schöb, 2003. "Workfare and Trade Unions: Labor Market Repercussions of Welfare Reform," CESifo Working Paper Series 942, CESifo Group Munich.
  14. 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.
  15. Dye, Ronald A. & Antle, Rick, 1986. "Cost-minimizing welfare programs," Journal of Public Economics, Elsevier, vol. 30(2), pages 259-265, July.
  16. Robert Moffitt, 2002. "The Temporary Assistance for Needy Families Program," NBER Working Papers 8749, National Bureau of Economic Research, Inc.
  17. 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.
  18. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
  19. Chambers, Robert G., 1989. "Workfare or welfare?," Journal of Public Economics, Elsevier, vol. 40(1), pages 79-97, October.
  20. David T. Ellwood, 2000. "Anti-Poverty Policy for Families in the Next Century: From Welfare to Work--and Worries," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 187-198, Winter.
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