Anatomy of Welfare Reform Evaluation: Announcement and Implementation Effects

Richard Blundell (), Marco Francesconi and Wilbert van der Klaauw

No 6050, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper formulates a simple model of female labor force decisions which embeds an in-work benefit reform and explicitly allows for announcement and implementation effects. We explore several mechanisms through which women can respond to the announcement of a reform that increases in-work benefits, including sources of intertemporal substitution, human capital accumulation, and labor market frictions. Using the model's insights and information of the precise timing of the announcement and implementation of a major UK in-work benefit reform, we estimate its effects on single mothers' behavior. We find important announcement effects on employment decisions. We show that this finding is consistent with the presence of short-run frictions in the labor market. Evaluations of this reform which ignore such effects produce impact effect estimates that are biased downwards by 15 to 35 percent.

Keywords: policy evaluation; in-work benefit; anticipation effects; labor market frictions; intertemporal substitution (search for similar items in EconPapers)
JEL-codes: D10 J13 J22 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2011-10
New Economics Papers: this item is included in nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

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Working Paper: Anatomy of Welfare Reform Evaluation:Announcement and Implementation Effects (2011)
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