Preferences and labor supply effects of benefits: the case of income-based Jobseeker’s Allowance
The UK income support system offers a guaranteed income level to single adults available for full time work so long as both earnings and hours worked are below a threshold level. In this paper we examine the effects of this on labour supply. We show that the restriction on hours worked is irrelevant to the household choices and will never bind. We then look for conditions on preferences under which it is possible to order households by preferences or the wage in such a way that all claimants are lower in the order. If there is a common wage and preferences satisfy a single crossing condition property there is such an ordering in which the most work averse are claimants. If preferences are common but the wage rates are heterogeneous then if preferences are quasilinear in leisure there is also an ordering with low wage households being claimants. With both wage rate and preferences heterogeneity these restrictions need to be combined to monotonically order the population.
|Date of creation:||Jun 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
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- Richard Blundell & Hilary W. Hoynes, 2004.
"Has 'In-Work' Benefit Reform Helped the Labor Market?,"
in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 411-460
National Bureau of Economic Research, Inc.
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NBER Working Papers
7363, National Bureau of Economic Research, Inc.
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- G. Burtless & J. A. Hausman, 1977.
"The Effect of Taxation on Labor Supply: Evaluating the Gary Negative Income Tax Experiment,"
211, Massachusetts Institute of Technology (MIT), Department of Economics.
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