Employment Effects of Welfare Reforms: Evidence from a Dynamic Structural Life-Cycle Model

Peter Haan (), Victoria Prowse () and Arne Uhlendorff ()
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Peter Haan: DIW Berlin

No 3480, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: In this paper we develop a dynamic structural life-cycle model of labor supply behavior which fully accounts for the effect of income tax and transfers on labor supply incentives. Additionally, the model recognizes the demand side driven rationing risk that might prevent individuals from realizing their optimal labor supply state, resulting in involuntary unemployment. We use this framework to study the employment effects of transforming a traditional welfare state, as is currently in place in Germany, towards a more Anglo-American system in which a large proportion of transfers are paid to the working poor.

Keywords: life-cycle labor supply; involuntary unemployment; in-work credits (search for similar items in EconPapers)
JEL-codes: J22 J64 C35 C61 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-hap and nep-lab
Date: 2008-05
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Related works:
Working Paper: Employment Effects of Welfare Reforms: Evidence from a Dynamic Structural Life-Cycle Model (2008)
Working Paper: Employment effects of welfare reforms - Evidence from a dynamic structural life-cycle model (2008)
Working Paper: Employment effects of welfare reforms: Evidence from a dynamic structural life-cycle model (2008)
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