The Transition from Welfare to Work and the Role of Potential Labor Income

Hilmar Schneider and Arne Uhlendorff

No 1420, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It is often argued that the high level of welfare claims in Germany causes little incentive for workers with low productivity to seek for a job. We examine the influence of the ratio between estimated potential labor income and the welfare payment level on the probability of leaving social welfare. Using the GSOEP, we estimate a discrete time hazard rate model with competing risks and unobserved heterogeneity. Our results show that the ratio has a positive effect on the probability of leaving social welfare. This effect is especially relevant for households with a potential labor income higher than their welfare payment level.

Keywords: duration analysis; labor supply; social welfare (search for similar items in EconPapers)
JEL-codes: C41 I38 J64 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-12
New Economics Papers: this item is included in nep-edu
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Citations: View citations in EconPapers (3)

Published - published in: Journal of Applied Social Sciences Studies, 2005, 125 (1), 51-61

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