A structural model of multiple welfare program participation and labor supply
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.
|Date of creation:||1995|
|Contact details of provider:|| Postal: 90 Hennepin Avenue, P.O. Box 291, Minneapolis, MN 55480-0291|
Phone: (612) 204-5000
Web page: http://minneapolisfed.org/
More information through EDIRC
|Order Information:||Web: http://www.minneapolisfed.org/pubs/|
References listed on IDEAS
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.:
- 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.
- McFadden, Daniel & Ruud, Paul A, 1994. "Estimation by Simulation," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 591-608, November.
- 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.
- 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.
- McFadden, Daniel, 1989.
"A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration,"
Econometric Society, vol. 57(5), pages 995-1026, September.
- Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
- Pakes, Ariel & Pollard, David, 1989. "Simulation and the Asymptotics of Optimization Estimators," Econometrica, Econometric Society, vol. 57(5), pages 1027-1057, September.
- Zabalza, A. & Pissarides, C. & Barton, M., 1980.
"Social security and the choice between full-time work, part-time work and retirement,"
Journal of Public Economics,
Elsevier, vol. 14(2), pages 245-276, October.
- 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.
- Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
- Robert Moffitt & Barbara Wolfe, 1990.
"The Effect of the Medicaid Program on Welfare Participation and Labor Supply,"
NBER Working Papers
3286, National Bureau of Economic Research, Inc.
- 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.
- Hausman, Jerry A, 1985. "The Econometrics of Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 53(6), pages 1255-1282, November.
- 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.
When requesting a correction, please mention this item's handle: RePEc:fip:fedmwp:557. 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: (Jannelle Ruswick)
If references are entirely missing, you can add them using this form.