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Estimating labour supply responses and welfare participation: Using a natural experiment to validate a structural labour supply model

Jorgen Hansen () and Xingfei Liu

Canadian Journal of Economics, 2015, vol. 48, issue 5, 1831-1854

Abstract: We estimate an economic model of labour supply and welfare participation using data on single men from Quebec drawn from the 1986 Canadian Census. Detailed budget sets for each work-welfare combinationaccounting for income taxes, tax credits and welfare benefit rulesare derived using a micro-simulation model. We show that predicted reactions to a welfare reform that took place in 1989 replicate actual changes in labour supply and welfare participation. We also illustrate the advantage of having estimated a structural model by showing how labour supply and welfare participation change when income taxes and benefit levels change.

JEL-codes: C52 (search for similar items in EconPapers)
Date: 2015
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Related works:
Working Paper: Estimating Labor Supply Responses and Welfare Participation: Using a Natural Experiment to Validate a Structural Labor Supply Model (2011) Downloads
Working Paper: Estimating Labor Supply Responses and Welfare Participation: Using a Natural Experiment to Validate a Structural Labor Supply Model (2011) Downloads
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