IDEAS home Printed from https://ideas.repec.org/p/bro/econwp/95-4.html
   My bibliography  Save this paper

A Structural Model of Multiple Welfare Program Participation and Labor Supply

Author

Listed:
  • M. Keane
  • R. Mofitt

Abstract

One of the long-standing issues in the literature on transfer programs for the U.S. low-income population concerns the high cumulative marginal tax rate on earnings induced by participation in the multiplicity of programs offered by the government. Empirical work on the issue has reached an impasse partly because the analytic solution to the choice problem is intractable and partly because the model requires the estimation of multiple sets of equations with limited dependent variables, an estimation problem which until recently has been computationally infeasible. In this paper we estimate a model of labor supply and multiple program participation using methods of simulation estimation that enable us to solve both problems. The results show asymmetric wage and tax rate effects, with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates, implying that high welfare tax rates do not necessarily induce major reductions in work effort.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers 95-4, Brown University, Department of Economics.
    • Handle: RePEc:bro:econwp:95-4
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
    2. Hausman, Jerry A, 1985. "The Econometrics of Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 53(6), pages 1255-1282, November.
    3. McFadden, Daniel & Ruud, Paul A, 1994. "Estimation by Simulation," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 591-608, November.
    4. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
    5. Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
    6. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
    7. Moffitt, Robert & Wolfe, Barbara L, 1992. "The Effect of the Medicaid Program on Welfare Participation and Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 615-626, November.
    8. Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-1057, September.
    9. A. Zabalza & C. Pissarides & M. Barton, 1980. "Social Security and the Choice between Full-time Work, Part-time Work and Retirement," NBER Chapters, in: Econometric Studies in Public Finance, pages 245-276, National Bureau of Economic Research, Inc.
    10. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. H. Hoynes & R. Moffitt, "undated". "The effectiveness of financial work incentives in DI and SSI: Lessons from other transfer programs," Institute for Research on Poverty Discussion Papers 1073-95, University of Wisconsin Institute for Research on Poverty.
    2. Andrén, Thomas, 2002. "A Structural Model of Childcare, Welfare, and the Labor Supply of Single Mothers," Working Papers in Economics 82, University of Gothenburg, Department of Economics.
    3. John Creedy & Guyonne Kalb, 2005. "Discrete Hours Labour Supply Modelling: Specification, Estimation and Simulation," Journal of Economic Surveys, Wiley Blackwell, vol. 19(5), pages 697-734, December.
    4. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695, Elsevier.
    5. Susan E Mayer, 2000. "Why Welfare Caseloads Fluctuate: A Review of Research on AFDC, SSI, and the Food Stamps Program," Treasury Working Paper Series 00/07, New Zealand Treasury.
    6. Michael P. Keane, 1995. "A new idea for welfare reform," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 19(Spr), pages 2-28.
    7. P. A. Smith, "undated". "The Effect of the 1981 Welfare Reforms on AFDC Participation and Labor Supply," Institute for Research on Poverty Discussion Papers 1117-97, University of Wisconsin Institute for Research on Poverty.
    8. Fayaz Farkhad, Bita & Meyerhoefer, Chad D., 2018. "The Impact of Participation in SNAP on Labor Force Decisions," 2018 Annual Meeting, August 5-7, Washington, D.C. 274180, Agricultural and Applied Economics Association.
    9. J. Amegashie & Bazoumana Ouattara & Eric Strobl, 2013. "Moral hazard and the composition of transfers: theory and evidence from cross-border transfers," Economics of Governance, Springer, vol. 14(3), pages 279-301, August.
    10. H. W. Hoynes, "undated". "Work, Welfare, and Family Structure: A Review of the Evidence," Institute for Research on Poverty Discussion Papers 1103-96, University of Wisconsin Institute for Research on Poverty.
    11. Hans G. Bloemen & Arie Kapteyn, 2008. "The estimation of utility-consistent labor supply models by means of simulated scores," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(4), pages 395-422.
    12. Hajivassiliou, Vassilis A. & Ruud, Paul A., 1986. "Classical estimation methods for LDV models using simulation," Handbook of Econometrics, in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 40, pages 2383-2441, Elsevier.
    13. R. Vincent Pohl, 2018. "Medicaid And The Labor Supply Of Single Mothers: Implications For Health Care Reform," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 59(3), pages 1283-1313, August.
    14. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis, in: Cathal O’Donoghue (ed.), Handbook of Microsimulation Modelling, volume 127, pages 167-221, Emerald Publishing Ltd.
    15. Geweke, John & Keane, Michael P & Runkle, David, 1994. "Alternative Computational Approaches to Inference in the Multinomial Probit Model," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 609-632, November.
    16. Kathleen McGarry, 1995. "Factors Determining Participation of the Elderly in SSI," NBER Working Papers 5250, National Bureau of Economic Research, Inc.
    17. A. S. Yelowitz, "undated". "Did recent medicaid reforms cause the caseload explosion in the food stamp program?," Institute for Research on Poverty Discussion Papers 1109-96, University of Wisconsin Institute for Research on Poverty.
    18. Hoynes, Hilary Williamson & Schanzenbach, Diane Whitmore, 2012. "Work incentives and the Food Stamp Program," Journal of Public Economics, Elsevier, vol. 96(1), pages 151-162.
    19. R. L. Hanson & J. T. Hartman, "undated". "Do welfare magnets attract?," Institute for Research on Poverty Discussion Papers 1028-94, University of Wisconsin Institute for Research on Poverty.
    20. Daniel Ackerberg, 2009. "A new use of importance sampling to reduce computational burden in simulation estimation," Quantitative Marketing and Economics (QME), Springer, vol. 7(4), pages 343-376, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bro:econwp:95-4. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Brown Economics Webmaster). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.