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Forecasting Behavioural and Distributional Effects of the Bofinger-Walwei Model using Microsimulation

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  • Wiemers Jürgen

    ()

  • Bruckmeier Kerstin

    () (Institut für Arbeitsmarkt- und Berufsforschung, Regensburger Straße 104, 90478 Nürnberg, Germany)

Abstract

Since Germany’s social assistance reform (“Hartz-IV-Reform”) in 2005 there has been a strong increase in the number of working poor and long-term unemployed. This development is often attributed to the remaining disincentives of the reformed social assistance to take up a low-paid full time job. Therefore, several proposals have been worked out to reduce these disincentives. In this paper we analyse an in-work benefit programme considered by the German government, which follows the proposal of Bofinger et al. (2006). We employ a microsimulation model for estimating labour supply as well as distributional and fiscal effects of this reform proposal.We provide “morning after effects”, i.e. fiscal effects without considering behavioural adjustments, and long run effects, which take into account the labour supply response following the introduction of the reform.We predict the labour supply responses by estimating a discrete choice model for different household types and find a moderate increase in labour supply (103,000 full-time equivalents) as well as overall low negative participation effects. The distributional analysis reveals an overall increase in poverty rates caused by lower earnings disregards as well as substantial deadweight losses, since a large part of the in-work benefit accrues to households who do not belong to the working poor in the status quo.

Suggested Citation

  • Wiemers Jürgen & Bruckmeier Kerstin, 2009. "Forecasting Behavioural and Distributional Effects of the Bofinger-Walwei Model using Microsimulation," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(4), pages 492-511, August.
  • Handle: RePEc:jns:jbstat:v:229:y:2009:i:4:p:492-511
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    References listed on IDEAS

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    1. Bonin, Holger & Schneider, Hilmar, 2006. "Analytical prediction of transition probabilities in the conditional logit model," Economics Letters, Elsevier, pages 102-107.
    2. Arntz, Melanie & Clauss, Markus & Kraus, Margit & Schnabel, Reinhold & Spermann, Alexander & Wiemers, Jürgen, 2007. "Arbeitsangebotseffekte und Verteilungswirkungen der Hartz-IV-Reform," IAB-Forschungsbericht 200710, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low- Income Families," HEW 9902002, EconWPA.
    4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, November.
    5. Bonin, Holger & Rinne, Ulf & Schneider, Hilmar, 2007. "Report No. 11: Untersuchung der beschäftigungs- und finanzpolitischen Auswirkungen des Bofinger/Walwei-Konzepts zur Neuordnung des Niedriglohnbereichs," IZA Research Reports 11, Institute for the Study of Labor (IZA).
    6. Koch, Susanne & Walwei, Ulrich, 2006. "Hinzuverdienstregelung im SGB II: Quo vadis?," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1949 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, pages 423-427.
    7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 129-137.
    8. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, May.
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    Cited by:

    1. Wolf, Katja & Stockinger, Bastian, 2016. "The productivity effects of worker mobility between heterogenous firms," Annual Conference 2016 (Augsburg): Demographic Change 145750, Verein für Socialpolitik / German Economic Association.
    2. Bruckmeier, Kerstin & Wiemers, Jürgen, 2016. "Differences in welfare take-up between immigrants and natives," Annual Conference 2016 (Augsburg): Demographic Change 145828, Verein für Socialpolitik / German Economic Association.

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