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'Making Work Pay' in a Rationed Labour Market

Olivier Bargain (), Marco Caliendo (), Peter Haan and Kristian Orsini ()

No 2033, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We assess the labour supply effects of two 'making work pay' reforms in Germany. We provide evidence in favour of policies that distinguish between low effort and low productivity by targeting individuals with low wages rather than individuals with low earnings. In assessing the policies we account for demand-side constraints by using a double-hurdle model. We identify and decompose the potential bias of labour supply elasticities derived in standard unconstrained models. Although this bias is not significant when assessing policies which mainly target voluntarily unemployed workers (typically secondary earners), it is substantial for policies which affect groups with high shares of involuntary unemployment.

Keywords: multinomial logit; household labour supply; microsimulation; involuntary unemployment; tax-benefit systems; double-hurdle (search for similar items in EconPapers)
JEL-codes: C25 C52 H31 J22 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2006-03
New Economics Papers: this item is included in nep-dcm, nep-hrm, nep-lab and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33) Track citations by RSS feed

Published in: Journal of Population Economics, 2010, 21 (1), 323-351

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