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A Structural Analysis of Labour Supply and Involuntary Unemployment in the Netherlands

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  • Henk-Wim Boer

    (CPB Netherlands Bureau for Economic Policy Analysis)

Abstract

Most structural models for labour supply ignore the possibility of involuntary unemployment which may lead to biased behavioural responses. We estimate a structural model for labour supply without and with involuntary unemployment for the Netherlands. We find that average labour supply elasticities are only slightly lower in the model with involuntary unemployment than in the model without involuntary unemployment. The main reason for this small bias is the relatively small share of individuals who are involuntarily unemployed in our data period. A simulation of tax-benefit reforms confirms that the upward bias in average labour supply responses is limited in the model without involuntary unemployment. Hence, this study provides empirical evidence that the standard labour supply model, without rationing, gives a good prediction of the effects of tax reforms when the level of (involuntary) unemployment in a country is not too high.

Suggested Citation

  • Henk-Wim Boer, 2018. "A Structural Analysis of Labour Supply and Involuntary Unemployment in the Netherlands," De Economist, Springer, vol. 166(3), pages 285-308, September.
    • Handle: RePEc:kap:decono:v:166:y:2018:i:3:d:10.1007_s10645-018-9326-y
    DOI: 10.1007/s10645-018-9326-y
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    Cited by:

    1. de Boer, Henk-Wim & Jongen, Egbert L. W., 2020. "Analysing Tax-Benefit Reforms in the Netherlands: Using Structural Models and Natural Experiments," IZA Discussion Papers 12892, Institute of Labor Economics (IZA).
    2. Tanja Fendel, 2020. "How Elastic is the Labour Supply of Female Migrants Relative to the Labour Supply of Female Natives?," De Economist, Springer, vol. 168(4), pages 475-517, December.
    3. Henk-Wim Boer & Egbert L. W. Jongen, 2023. "Analysing tax-benefit reforms in the Netherlands using structural models and natural experiments," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(1), pages 179-209, January.

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    More about this item

    Keywords

    Discrete choice models; Household labour supply; Involuntary unemployment;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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