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An Australian Model for Labour Supply and Welfare Participation in Two-Adult Households

Listed author(s):
  • Guyonne Kalb

In this paper, a simultaneous discrete choice model for welfare participation and labour supply of two-adult households is estimated. It is assumed that in addition to the indirect effect of welfare participation on utility, welfare participation also has a direct effect. The resulting net effect is unknown and may depend on personal characteristics. To account for the direct effect of welfare participation on utility, a parameter to measure the disutility associated with welfare participation is included in the utility function. This model allows for the fact that not all eligible people are participating in welfare. The results indicate that there is evidence of a significant disutility associated with welfare participation. From simulations, it is found that a change in the benefit withdrawal rate or the maximum benefit level does not seem to have a large effect on the labour supply of either adult.

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File URL: http://www.sprc.unsw.edu.au/dp/dp082.pdf
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Paper provided by University of New South Wales, Social Policy Research Centre in its series Discussion Papers with number 0082.

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Length: 50 pages
Date of creation: Jun 1998
Handle: RePEc:wop:sprcdp:0082
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Web page: http://www.sprc.unsw.edu.au/dp/
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  1. 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.
  2. Soest, Arthur van & Kapteyn, Arie & Kooreman, Peter, 1993. "Coherency and regularity of demand systems with equality and inequality constraints," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 161-188.
  3. 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 553-589, August.
  4. 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.
  5. Hoynes, Hilary Williamson, 1996. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation under AFDC-UP," Econometrica, Econometric Society, vol. 64(2), pages 295-332, March.
  6. 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.
  7. Hausman, Jerry A., 1979. "The econometrics of labor supply on convex budget sets," Economics Letters, Elsevier, vol. 3(2), pages 171-174.
  8. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
  9. Moffitt, Robert, 1986. "The Econometrics of Piecewise-Linear Budget Constraints: A Survey and Exposition of the Maximum Likelihood Method," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(3), pages 317-328, July.
  10. 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.
  11. Richard W. Blundell, 1995. "The Impact of Taxation on Labour Force Participation and Labour Supply," OECD Jobs Study Working Papers 8, OECD Publishing.
  12. Hausman, Jerry A, 1985. "The Econometrics of Nonlinear Budget Sets," Econometrica, Econometric Society, vol. 53(6), pages 1255-1282, November.
  13. Kloek, Tuen & van Dijk, Herman K, 1978. "Bayesian Estimates of Equation System Parameters: An Application of Integration by Monte Carlo," Econometrica, Econometric Society, vol. 46(1), pages 1-19, January.
  14. Burtless, Gary & Hausman, Jerry A, 1978. "The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiments," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1103-1130, December.
  15. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  16. Wales, Terence J & Woodland, A D, 1977. "Estimation of the Allocation of Time for Work, Leisure, and Housework," Econometrica, Econometric Society, vol. 45(1), pages 115-132, January.
  17. 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.
  18. van Dijk, H. K. & Kloek, T., 1980. "Further experience in Bayesian analysis using Monte Carlo integration," Journal of Econometrics, Elsevier, vol. 14(3), pages 307-328, December.
  19. 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.
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