Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis

Stefan Boeters, Gürtzgen Nicole and Reinhold Schnabel
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Gürtzgen Nicole: Centre for European Economic Research (ZEW),Mannheim, Germany

German Economic Review, 2006, vol. 7, issue 4, 363-388

Abstract: In this paper, the effects of social assistance reform proposals are discussed for the case of Germany using a computable general equilibrium model that incorporates a discrete choice model of labour supply. This allows us to identify general equilibrium effects of the reforms on wages and unemployment. The simulation results show that general equilibrium wage reactions mitigate labour supply effects and that unemployment in fact decreases. Wage reactions are thus sufficiently strong to prevent additional labour supply from translating into higher unemployment. The simulations indicate that major cuts in welfare payments are necessary to produce substantial employment effects.

Keywords: Social assistance; discrete labour supply model; applied general equilibrium (search for similar items in EconPapers)
Date: 2006
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Journal Article: Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis (2006)
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DOI: 10.1111/j.1468-0475.2006.00124.x

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