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Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis

  • Schnabel, Reinhold
  • Gürtzgen, Nicole
  • Boeters, Stefan

This paper analyses the effects of a social assistance reform in Germany. In contrast to studies which are based on microsimulation methods we use a computable general equilibrium model which incorporates a discrete choice model of labour supply to simulate a variety of reform scenarios. The main contribution is that we are able to identify general equilibrium effects of a reform on wages and unemployment. The simulation results show that general equilibrium wage reactions tend to mitigate labour supply effects. Moreover, the simulations indicate that substantial employment effects are to be expected only from major cuts in welfare payments.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 03-70.

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Date of creation: 2003
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Handle: RePEc:zbw:zewdip:1688
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  1. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  2. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2005. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Society for Computational Economics, vol. 26(3), pages 1-29, November.
  3. Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002. "Taxation and unemployment: an applied general equilibrium approach for Germany," ZEW Discussion Papers 02-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Immervoll, Herwig & Kleven, Henrik & Kreiner, Claus Thustrup & Saez, Emmanuel, 2004. "Welfare Reform in European Countries: A Micro-Simulation Analysis," CEPR Discussion Papers 4324, C.E.P.R. Discussion Papers.
  5. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  6. Klaus F. Zimmermann, 2003. "Beschäftigungspotentiale im Niedriglohnsektor," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 11-24.
  7. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August.
  8. Holger Bonin & Wolfram Kempe & Hilmar Schneider, 2003. "Kombilohn oder Workfare?: Zur Wirksamkeit zweier arbeitsmarktpolitischer Strategien," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 51-67.
  9. Wolfgang Ochel, 2001. "Welfare to Work in the US: A Model for Germany?," CESifo Working Paper Series 537, CESifo Group Munich.
  10. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, 05.
  11. Breyer, Friedrich & Franz, Wolfgang & Homburg, Stefan & Schnabel, Reinhold & Wille, Eberhard, 2004. "Reform der sozialen Sicherung," EconStor Books, ZBW - German National Library of Economics, number 92399.
  12. Jacobebbinghaus, Peter & Steiner, Viktor, 2003. "Reforming Social Welfare as We Know It? A Microsimulation Study for Germany," ZEW Discussion Papers 03-33, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  13. 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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