Estimating Labor Supply Responses and Welfare Participation: Using a Natural Experiment to Validate a Structural Labor Supply Model

Jorgen Hansen and Xingfei Liu

CIRANO Working Papers from CIRANO

Abstract: In this paper, we formulate and estimate an economic model of labor supply and welfare participation. The model is estimated on data on single men from Quebec drawn from the 1986 Canadian Census. Budget sets for each work-welfare combination - accounting for income taxes, tax credits and welfare benefit rules - are derived using a microsimulation model. We validate our model by comparing reactions to a welfare reform that implied a dramatic increase in welfare benefits predicted by our model to those obtained by using a regression discontinuity approach. The results show that our model is capable of recovering actual changes in labor supply and welfare participation. We also show the advantage of having estimated a structural model by illustrating how labor supply and welfare participation change when benefit levels change.

Keywords: labor supply; welfare participation; unobserved heterogeneity; natural experiment; regression discontinuity; microsimulation (search for similar items in EconPapers)
Date: 2011-07-01
New Economics Papers: this item is included in nep-cmp, nep-lab and nep-lma
References: Add references at CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://cirano.qc.ca/files/publications/2011s-53.pdf

Related works:
Journal Article: Estimating labour supply responses and welfare participation: Using a natural experiment to validate a structural labour supply model (2015)
Journal Article: Estimating labour supply responses and welfare participation: Using a natural experiment to validate a structural labour supply model (2015)
Working Paper: Estimating Labor Supply Responses and Welfare Participation: Using a Natural Experiment to Validate a Structural Labor Supply Model (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cir:cirwor:2011s-53

Access Statistics for this paper

More papers in CIRANO Working Papers from CIRANO Contact information at EDIRC.
Bibliographic data for series maintained by Webmaster ().