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Employment effects of welfare reforms: Evidence from a dynamic structural life-cycle model

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  • Peter Haan

    (DIW - Deutsches Institut für Wirtschaftsforschung - German Institute for Economic Research, PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Victoria Prowse

    (Department of Economics - University of Oxford - University of Oxford [Oxford])

  • Arne Uhlendorff

    (IZA - Institute for the Study of Labor - IZA, DIW - Deutsches Institut für Wirtschaftsforschung - DIW)

Abstract

In this paper we develop a dynamic structural life-cycle model of labor supply behavior which fully accounts for the effects of income tax and transfers on labor supply incentives. Additionally, the model recognizes the demand side driven rationing risk that might prevent individuals from realizing their optimal labor supply state, resulting in involuntary unemployment. We use this framework to study the employment effects of transforming a traditional welfare state, as is currently in place in Germany, towards a more Anglo-American system in which a large proportion of transfers are paid to the working poor.

Suggested Citation

  • Peter Haan & Victoria Prowse & Arne Uhlendorff, 2008. "Employment effects of welfare reforms: Evidence from a dynamic structural life-cycle model," PSE Working Papers halshs-00586748, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00586748
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00586748
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    References listed on IDEAS

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    Cited by:

    1. Peter Haan & Victoria Prowse, 2010. "A structural approach to estimating the effect of taxation on the labour market dynamics of older workers," Econometrics Journal, Royal Economic Society, vol. 13(3), pages 99-125, October.
    2. Akay, Alpaslan & Bargain, Olivier & Jara, H. Xavier, 2015. "Back To Bentham: Should We? LargeScale Comparison of Decision versus Experienced Utility for IncomeLeisure Preferences," Working Papers in Economics 611, University of Gothenburg, Department of Economics.

    More about this item

    Keywords

    life-cycle labor supply; involuntary unemployment; in-work credits;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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