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Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis

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  • Schnabel, Reinhold
  • Gürtzgen, Nicole
  • Boeters, Stefan

Abstract

This paper analyses the effects of a social assistance reform in Germany. In contrast to studies which are based on microsimulation methods we use a computable general equilibrium model which incorporates a discrete choice model of labour supply to simulate a variety of reform scenarios. The main contribution is that we are able to identify general equilibrium effects of a reform on wages and unemployment. The simulation results show that general equilibrium wage reactions tend to mitigate labour supply effects. Moreover, the simulations indicate that substantial employment effects are to be expected only from major cuts in welfare payments.

Suggested Citation

  • Schnabel, Reinhold & Gürtzgen, Nicole & Boeters, Stefan, 2003. "Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis," ZEW Discussion Papers 03-70, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:1688
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    1. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2007. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Springer;Society for Computational Economics, vol. 29(3), pages 427-427, May.
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    8. Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Claus Thustrup Kreiner, 2003. "The Marginal Cost of Public Funds in OECD Countries. Hours of Work Versus Labor Force Participation," CESifo Working Paper Series 935, CESifo.
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    12. Klaus F. Zimmermann, 2003. "Beschäftigungspotentiale im Niedriglohnsektor," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 72(1), pages 11-24.
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    14. Jacobebbinghaus, Peter & Steiner, Viktor, 2003. "Reforming Social Welfare as We Know It? A Microsimulation Study for Germany," ZEW Discussion Papers 03-33, ZEW - Leibniz Centre for European Economic Research.
    15. Hans-Werner Sinn & Christian Holzner & Wolfgang Meister & Wolfgang Ochel & Martin Werding, 2002. "Aktivierende Sozialhilfe - Ein Weg zu mehr Beschäftigung und Wachstum," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 55(09), pages 03-52, May.
    16. Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002. "Taxation and unemployment: an applied general equilibrium approach for Germany," ZEW Discussion Papers 02-39, ZEW - Leibniz Centre for European Economic Research.
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    Cited by:

    1. Gradzewicz, Michal & Jędrzejowicz, Tomasz & Żółkiewski, Zbigniew, 2007. "The cost of fiscal tightening in Poland on the road to the Euro: does the labour market matter? (CGE model simulations)," MPRA Paper 28146, University Library of Munich, Germany.
    2. Vincent Law, 2011. "Welfare Policy and Labour Supply of Immigrants in Australia," Crawford School Research Papers 1109, Crawford School of Public Policy, The Australian National University.
    3. Bargain, Olivier & Orsini, Kristian, 2006. "In-work policies in Europe: Killing two birds with one stone?," Labour Economics, Elsevier, vol. 13(6), pages 667-697, December.
    4. Peichl, Andreas, 2005. "Die Evaluation von Steuerreformen durch Simulationsmodelle," FiFo Discussion Papers - Finanzwissenschaftliche Diskussionsbeiträge 05-1, University of Cologne, FiFo Institute for Public Economics.
    5. Kolm, Ann-Sofie & Tonin, Mirco, 2006. "In-Work Benefits in Search Equilibrium," Research Papers in Economics 2006:12, Stockholm University, Department of Economics.
    6. Stefan Boeters & Michael Feil & Nicole Gürtzgen, 2007. "Discrete Working Time Choice in an Applied General Equilibrium Model," Computational Economics, Springer;Society for Computational Economics, vol. 29(3), pages 427-427, May.
    7. Andreas PEICHL, 2008. "The Benefits of Linking CGE and Microsimulation Models - Evidence from a Flat Tax analysis," EcoMod2008 23800106, EcoMod.
    8. Andreas Peichl, 2009. "The Benefits and Problems of Linking Micro and Macro Models — Evidence from a Flat Tax Analysis," Journal of Applied Economics, Taylor & Francis Journals, vol. 12(2), pages 301-329, November.
    9. Schubert, Stefanie & Schnabel, Reinhold, 2009. "Curing Germany's health care system by mandatory health premia?," Journal of Health Economics, Elsevier, vol. 28(5), pages 911-923, September.
    10. Arntz, Melanie & Boeters, Stefan & Gurtzgen, Nicole, 2006. "Alternative approaches to discrete working time choice in an AGE framework," Economic Modelling, Elsevier, vol. 23(6), pages 1008-1032, December.
    11. Arntz, Melanie & Boeters, Stefan & Gürtzgen, Nicole & Schubert, Stefanie, 2008. "Analysing welfare reform in a microsimulation-AGE model: The value of disaggregation," Economic Modelling, Elsevier, vol. 25(3), pages 422-439, May.
    12. Franz, Wolfgang & Guertzgen, Nicole & Schubert, Stefanie & Clauss, Markus, 2007. "Reformen im Niedriglohnsektor: Eine integrierte CGE-Mikrosimulationsstudie der Arbeitsangebots- und Beschäftigungseffekte," ZEW Discussion Papers 07-085, ZEW - Leibniz Centre for European Economic Research.
    13. Krimmer, Pascal & Raffelhüschen, Bernd, 2007. "Grundsicherung in Deutschland: Analyse und Reformbedarf," FZG Discussion Papers 14, University of Freiburg, Research Center for Generational Contracts (FZG).
    14. Melanie Arntz & Stefan Boeters & Nicole Gürtzgen & Stefanie Schubert, 2006. "Analysing Welfare Reform in a Microsimulation-AGE Model," Computing in Economics and Finance 2006 109, Society for Computational Economics.

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    More about this item

    Keywords

    social assistance; discrete labour supply model; applied general equilibrium;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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