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

  • Victoria Prowse
  • Peter Haan

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 traditonal 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.

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File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper391.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 391.

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Date of creation: 01 Apr 2008
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Handle: RePEc:oxf:wpaper:391
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