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The heterogeneous effects of social assistance and unemployment insurance: evidence from a life-cycle model of family labor supply and savings

Author

Listed:
  • Peter Haan

    (Institute for Fiscal Studies)

  • Victoria Prowse

    (Purdue University)

Abstract

We empirically analyze the heterogeneous welfare effects of unemployment insurance and social assistance. We estimate a structural life cycle model of singles' and married couples' labor supply and savings decisions. The model includes heterogeneity by age, education, wealth, sex, and household composition. In aggregate, social assistance dominates unemployment insurance; however, the opposite holds true for married men, whose leisure time declines more than that of their spouses when unemployment insurance is reduced. A revenue-neutral rebalancing of social support away from unemployment insurance and toward social assistance increases aggregate welfare. Income pooling in married households decreases the welfare value of social assistance.
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Suggested Citation

  • Peter Haan & Victoria Prowse, 2023. "The heterogeneous effects of social assistance and unemployment insurance: evidence from a life-cycle model of family labor supply and savings," IFS Working Papers W23/20, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:ifsewp:23/20
    as

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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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