Spatial Variation in Incentives to Work and Hysteresis in Welfare
This paper suggests a novel explanation of the steady rise in Germany's welfare recipient numbers. In the paper's model, there are disadvantaged households employed in a city with few amenities (a bad-amenity city) who would prefer to receive welfare in a city with many amenities (a good-amenity city). They can be kept out by the good-amenity city's local government but only until a recession sets in. Then they do move from employment in the bad-amenity city into welfare in the good-amenity city. Hysteresis in welfare results.
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Volume (Year): 59 (2002/2003)
Issue (Month): 4 (December)
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