Essays in labor economics and public policy

SSRN Electronic Journal, 2000

We study three budget-neutral reforms of the German tax and transfer system designed to improve work incentives for people with low incomes: a feasible flat tax reform that provides a basic income which is equal to the current level of the means tested unemployment benefit, and two alternative reforms that involve employment subsidies to stimulate participation and full-time work, respectively. We estimate labor supply reactions and welfare effects using a microsimulation model based on household data from the Socio-Economic Panel (SOEP) and a structural labor supply model. We find that all three reforms increase labor supply in the first decile of the income distribution. However, the flat tax scenario reduces overall labor supply by 4.9%, the reform scenario designed to increase participation reduces labor supply by 1%, while the reform that provides improved incentives to work full-time has negligible effects on overall labor supply. With equal welfare weights, aggregate welfare gains are realizable under all three reforms.

Empirica, 2005

We analyze the work incentives and labor supply effects of the so-called mini-jobs reform (subsidies of social security contributions to people with low-earnings jobs) introduced in Germany in April 2003. The analysis is based on a structural labor supply model embedded in a detailed tax-benefit microsimulation model for which we use the German Socio-Economic Panel (GSOEP). Our simulation results show that the likely employment effects of the mini-jobs reform will be small. The small positive participation effect is outweighed by a negative hours effect among already employed workers. The fiscal effects of the reform are also likely to be negative. We conclude that the analyzed mini-job reform is not an effective policy to increase employment of people with low earnings capacity.

2005

To tackle mass unemployment and increase participation rates, the German government over recent years has mainly focused on supply side strategies, including 'making work pay' policies. The 2003 Mini-Job reform introduced an extended subsidy of social security contributions for low wage workers. In this paper, we evaluate the employment effects of this reform using a behavioural tax-benefit microsimulation model. Ex-ante micro policy evaluations based on labour supply models usually ignore involuntary unemployment. This leads to biased estimates of labour supply elasticities and erroneous predictions of the effects of the measure. This aspect is all the more important in a country like Germany, characterized by high unemployment. In this analysis we evaluate the employment effects of the Mini-Job reform by controlling for involuntary unemployment through a double-hurdle model. When focusing on the main labour force, we show that the Mini-Job reform has only a small positive ...

University of St Gallen Department of Economics Working Paper Series 2009, 2009

Do German Welfare-to-Work Programmes Reduce Welfare and Increase Work? Many Western economies have reformed their welfare systems with the aim of activating welfare recipients by increasing welfare-to-work programmes and job search enforcement. We evaluate the three most important German welfare-to-work programmes implemented after a major reform in January 2005 ("Hartz IV"). Our analysis is based on a unique combination of large scale survey and administrative data that is unusually rich with respect to individual, household, agency level, and regional information. We use this richness to allow for a selection-on-observables approach when doing the econometric evaluation. We find that short-term training programmes on average increase their participants' employment perspectives and that all programmes induce further programme participation. We also show that there is considerable effect heterogeneity across different subgroups of participants that could be exploited to improve the allocation of welfare recipients to the specific programmes and thus increase overall programme effectiveness.

SSRN Electronic Journal, 2021

Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.

Journal of Economic Psychology, 2018

Highlights  I analyse the effect of public employment schemes on unemployed worker  The impact is estimated via semi-parametric difference-indifferences estimation  The results reveal positive effects on social inclusion and non-cognitive skills  Apparently, PES reduce the negative psycho-social consequences of unemployment i The DGB (Deutscher Gewerkschaftsbund) is the confederation of the most important unions in Germany. SPD is the social democratic party in Germany, and the Paritätische is the confederation of the most important welfare service and charity organizations in Germany. ii The results presented here are part of an evaluation that has been conducted on behalf of the German Federal Ministry of Labour and Social Affairs (Evaluation of the Modellprojekte Bürgerarbeit). They do not necessarily represent its opinions and views. The final report can be found at www.iaw.edu. iii There are also some additional variables used which relate to search behaviour. I discard these variables from the analysis, because such questions can only be asked to the unemployed. Therefore, studying the effects of ALMPs on these variables is only possible for persons who remain unemployed throughout the whole programme, which clearly represent a non-random sample of all participants.

2007

We study optimal taxation in an environment where the agents dier in their work opportunity costs. The opportunity cost of work is xed, independent of the number of hours worked: the only decision of the agents is to (full time) participate, or not, in the labor force. The planner, who does not observe the opportunity costs, is utilitarian. We nd a large class of planner objectives where it is optimal to have the low skilled workers work more than in the laissezfaire. At the optimum, their net income at work is larger than the sum of their subsistence income and of their productivity. This property holds when the social weights attached to the unemployed are not too large, in particular when the average social weight of the unemployed is not larger than the social weight of the marginal employee. It is robust to the presence of income eects. Our results provide theoretical foundations for low skilled work subsidy by linking the scope of welfare to work programs to the society redistributive objectives.

Empirical Economics, 2011

In recent decades, many "Making Work Pay" policies have been implemented in OECD countries. These policies aim at improving the financial incentives for work while maintaining high levels of social protection. Examples include the Earned Income Tax Credit in the USA and the Working Family Tax Credit in the UK. While these policies are proven to be quite effective with respect to poverty alleviation, many worry that they may discourage labor supply on the intensive margin. We consider an alternative measure implemented in Belgium: the Workbonus, which subsidizes social security contributions for low-skilled workers. This program differs from other measures in that the eligibility and the level of the subsidy are based on full-time equivalent earnings. The instrument therefore distinguishes between low skill and low effort and avoids the above-mentioned disincentive effect. We assess the effects of the Workbonus on labor supply using a particular discrete-choice labor supply model in which individuals are assumed to choose among jobs belonging to individual-specific latent choice sets. In particular, we compare the Workbonus with a tax credit system temporarily implemented in Belgium in [2001][2002][2003][2004]. Results show that both measures have a positive impact on labor supply. However, the Workbonus is more efficient in terms of cost per additional full-time equivalent position created and avoids the "part-time trap" implicit in the tax credit system.

Journal of International and Comparative Social Policy

This review paper critically examines a range of analytical frameworks used to analyse the German mini-job scheme in comparative research on work and welfare. The approaches examined include labour market dualisation in comparative political economy research and welfare-to-work policies in comparative social policy research. The paper claims that using stylized facts instead of a thorough understanding of the broader context of national employment and social systems leads to misinterpretations in terms of policy learning. By describing the institutional context and main drivers of the evolution of mini-jobs over time, based on variety of data sources, statistics and empirical studies, the paper addresses the critical role of this specific employment scheme for gender equality, largely ignored in the comparative literature.

2006

Increasing work incentives for people with low incomes is a common topic in the policy debate across European countries. The "Mini-Job" reform in Germany - introduced on April 1, 2003 - can be seen in line with these policies, exempting labour income below a certain threshold from taxes and employees' social security contributions. We carry out an ex-post evaluation to identify the short-run effects of this reform. Our identification strategy uses an exogenous variation in the interview months in the German Socio-Economic Panel, that allows us to distinguish groups that are (or are not) affected by the reform. To account for seasonal effects we additionally use a difference-in-differences strategy. The results show that the short-run effects of the reform are limited. We find no significant short-run effects for marginal employment. However, there is evidence that single men who are already employed react immediately and increase secondary job holding.