Labour Supply and Welfare Participation in Australian Two-Adult Households: Accounting for Involuntary Unemployment and the 'Cost' of Part-time Work
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.
|Date of creation:||Oct 2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 03 9919 1877
Web page: http://www.copsmodels.com/about.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul A. Hagstrom, 1996. "The Food Stamp Participation and Labor Supply of Married Couples: An Empirical Analysis of Joint Decisions," Journal of Human Resources, University of Wisconsin Press, vol. 31(2), pages 383-403.
- Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
- Thomas Fraker & Robert Moffitt, 1988.
"The Effect of Food Stamps on Labor Supply: A Bivariate Selection Model,"
Mathematica Policy Research Reports
efa52cc812a34ce2ac0427b91, Mathematica Policy Research.
- 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.
- Keane, Michael & Moffitt, Robert, 1998.
"A Structural Model of Multiple Welfare Program Participation and Labor Supply,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
- Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
- M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
- 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.
- Laisney, François & Lechner, Michael & van Soest, Arthur & Wagenhals, Gerhard, 1993. "A Life Cycle Labour Supply Model with Taxes Estimated on German Panel Data: The Case of Parallel Preferences," ZEW Discussion Papers 93-01, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
- Michael Charette & Ronald Meng, 1994. "The Determinants of Welfare Participation of Female Heads of Household in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 290-306, May.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
- Hoynes, Hilary Williamson, 1996.
"Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP,"
Econometric Society, vol. 64(2), pages 295-332, March.
- Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
- Duclos, Jean-Yves, 1997.
"Estimating and Testing a Model of Welfare Participation: The Case of Supplementary Benefits in Britain,"
London School of Economics and Political Science, vol. 64(253), pages 81-100, February.
- Duclos, J.Y., 1993. "Estimating and Testing a model of Welfare Participation: The Case of Supplementary Benefits in Britain," Papers 9331, Laval - Recherche en Politique Economique.
- Wales, T J & Woodland, A D, 1976. "Estimation of Household Utility Functions and Labor Supply Response," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(2), pages 397-410, June.
- Eyland, E A & Mason, C A & Lapsley, H M, 1982. "Determinants of Female Employment," The Economic Record, The Economic Society of Australia, vol. 58(160), pages 11-17, March.
- Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
When requesting a correction, please mention this item's handle: RePEc:cop:wpaper:bp-35. 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: (Mark Horridge)
If references are entirely missing, you can add them using this form.