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Labour Supply and Welfare Participation in Australian Two-Adult Households: Accounting for Involuntary Unemployment and the 'Cost' of Part-time Work

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  • Guyonne R. Kalb

Abstract

We estimate a simultaneous discrete choice model for welfare participation and labour supply of two-adult households in Australia using the Income and Housing Costs Survey of 1994/1995. In this paper only unemployment-related welfare payments are considered. Welfare participation is assumed to have a positive indirect effect (through income) and a negative direct effect on utility. This approach allows for non-participation of eligible people. An earlier developed labour supply and welfare participation model is extended in this paper by adding employment equations to account for involuntary unemployment. In addition, a part-time penalty term is included in the utility function to allow for monetary or non-monetary costs of working part time and the number of discrete choices is increased. The first two extensions seem to improve the model's ability to simulate the correct distribution of actual labour supply. Without these extensions, labour force non-participation is under-estimated and the number of people in part-time employment is over-estimated. The results indicate that there is evidence of a significant disutility associated with welfare participation for all specifications of the model. We also find that a change in the benefit withdrawal rate or the maximum benefit level does not seem to have a large effect on the actual labour supply of either adult.

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  • Guyonne R. Kalb, 2000. "Labour Supply and Welfare Participation in Australian Two-Adult Households: Accounting for Involuntary Unemployment and the 'Cost' of Part-time Work," Centre of Policy Studies/IMPACT Centre Working Papers bp-35, Victoria University, Centre of Policy Studies/IMPACT Centre.
  • Handle: RePEc:cop:wpaper:bp-35
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    References listed on IDEAS

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    Cited by:

    1. Guyonne Kalb & Rosanna Scutella, 2004. "Wage and employment rates in New Zealand from 1991 to 2001," New Zealand Economic Papers, Taylor & Francis Journals, vol. 38(1), pages 21-47.
    2. Jürgen Wiemers, 2015. "Endogenizing take-up of social assistance in a microsimulation model. A case study for Germany," International Journal of Microsimulation, International Microsimulation Association, vol. 8(2), pages 4-27.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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