Welfare Dependence and Self-Control: An Empirical Analysis

Marc Chan

The Review of Economic Studies, 2017, vol. 84, issue 4, 1379-1423

Abstract: A hyperbolic discounting model of labour supply and welfare participation with heterogeneous time preference parameters is estimated. Exclusion restrictions are constructed from variations in behaviour induced by time limits in a welfare reform experiment. We find that most individuals are time-inconsistent, and they exhibit varying degrees of present bias and perception of the commitment problem. Introducing a welfare component to the tax system can make individuals worse off by aggravating the commitment problem. Certain dynamic policy interventions carry sizeable commitment-related work incentives; for instance, a dynamic sanction triggered by past employment can be preferred by some individuals as a commitment device.

Keywords: Welfare dependence; Hyperbolic discounting; Time limits; Female labour supply; Welfare reform experiment; Discrete choice dynamic programming (search for similar items in EconPapers)
JEL-codes: C3 I3 J2 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:84:y:2017:i:4:p:1379-1423.

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