Estimating Labor Supply Responses and Welfare Participation: Using a Natural Experiment to Validate a Structural Labor Supply Model
In this paper, we formulate and estimate an economic model of labor supply and welfare participation. The model is estimated on data on single men from Quebec drawn from the 1986 Canadian Census. Budget sets for each work-welfare combination - accounting for income taxes, tax credits and welfare benefit rules - are derived using a microsimulation model. We validate our model by comparing reactions to a welfare reform that implied a dramatic increase in welfare benefits predicted by our model to those obtained by using a regression discontinuity approach. The results show that our model is capable of recovering actual changes in labor supply and welfare participation. We also show the advantage of having estimated a structural model by illustrating how labor supply and welfare participation change when benefit levels change.
|Date of creation:||01 Jul 2011|
|Date of revision:|
|Contact details of provider:|| Postal: 1130 rue Sherbrooke Ouest, suite 1400, Montréal, Quéc, H3A 2M8|
Phone: (514) 985-4000
Fax: (514) 985-4039
Web page: http://www.cirano.qc.ca/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cir:cirwor:2011s-53. 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: (Webmaster)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.