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Workfare, Monitoring, and Efficiency Wages

Author

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  • Christian Holzner
  • Volker Meier
  • Martin Werding

Abstract

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 and monitoring activities. 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.

Suggested Citation

  • Christian Holzner & Volker Meier & Martin Werding, 2006. "Workfare, Monitoring, and Efficiency Wages," CESifo Working Paper Series 1749, CESifo.
    • Handle: RePEc:ces:ceswps:_1749
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    References listed on IDEAS

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    Cited by:

    1. 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, January.
    2. Torben Andersen, 2010. "Why do Scandinavians Work?," CESifo Working Paper Series 3068, CESifo.
    3. Heijdra, Ben J. & Ligthart, Jenny E., 2007. "Fiscal policy, monopolistic competition, and finite lives," Journal of Economic Dynamics and Control, Elsevier, vol. 31(1), pages 325-359, January.
    4. Andersen, Torben M., 2012. "Migration, Redistribution and the Universal Welfare Model," IZA Discussion Papers 6665, Institute of Labor Economics (IZA).
    5. Robin Boadway, 2011. "Viewpoint: Innovations in the theory and practice of redistribution policy," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1138-1183, November.
    6. Wu Joseph S. K. & Ho Chi Pui, 2017. "The Shapiro-Stiglitz Model with Non-constant Marginal Utility," Open Economics, De Gruyter, vol. 1(1), pages 36-48, August.

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    More about this item

    Keywords

    workfare; welfare; efficiency wages; monitoring;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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