The Transition from Welfare to Work and the Role of Potential Labor Income

Hilmar Schneider () and Arne Uhlendorff

No 1420, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: It is often argued that the high level of welfare claims in Germany causes little incentive for workers with low productivity to seek for a job. We examine the influence of the ratio between estimated potential labor income and the welfare payment level on the probability of leaving social welfare. Using the GSOEP, we estimate a discrete time hazard rate model with competing risks and unobserved heterogeneity. Our results show that the ratio has a positive effect on the probability of leaving social welfare. This effect is especially relevant for households with a potential labor income higher than their welfare payment level.

Keywords: duration analysis; labor supply; social welfare (search for similar items in EconPapers)
JEL-codes: C41 I38 J64 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-12
New Economics Papers: this item is included in nep-edu
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Citations: View citations in EconPapers (3)

Published - published in: Journal of Applied Social Sciences Studies, 2005, 125 (1), 51-61

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