a dynamic model of welfare reform a dynamic structural model of labor supply welfare participation and food stamp participation is estimated using the 1992 1993 and 1996 panels of the survey of income and program participation details of various policies including welfare time limits work requirements and earned income tax credit eitc are incorporated formally in the budget constraint policy simulations reveal that the economy accounts for half of the increase in the labor supply of female heads of family between 1992 and 1999 a time limit results in a larger efficiency gain than a work requirement or a direct reduction in welfare benefits a reform package can lead to both a reduction in the government expenditure and an improvement in utility the eitc expansion results in a substantial efficiency gain among individuals with the lowest expected wage these individuals are almost unaffected by the economic expansion but their income and utility increase significantly under the reform package

cooperative and noncooperative r d in duopoly with spillovers contrary to the usual assumption made in most oligopoly models relations among firms are seldom of a wholly cooperative or noncooperative type in many situations they compete in some fields while they cooperate in others an important example is the case of cooperative research efforts bringing fierce competitors together two types of agreement are observed first r d cooperation can take place at the so called precompetitive stage companies share basic information and efforts in the r d stage but remain rivals in the market place 1 a second type of agreement involves an extended collusion between partners creating common policies at the product level the usual justifications of this extension are the difficulties of protecting intellectual property the idea is then to allow partners who have achieved inventions together to also control together the processes and products which embody the results of their collaboration in order to recuperate jointly their r d investments 2 what could be expected from these types of agreement is a reduction in r d expenditures because of less wasteful duplication and a reduction of total production because of more reprinted from the american economic review 78 5 1133 1137 1988 center for operations research econometrics 1348 louvain la neuve belgium we are grateful to jean

the pitfalls of work requirements in welfare to work policies experimental evidence on human capital accumulation in the self sufficiency project abstract this paper investigates whether policies that encourage recipients to exit welfare for full time employment influence participation in educational activity the self sufficiency project ssp was a demonstration project where long term welfare recipients randomly assigned to the treatment group were offered a generous earnings supplement if they exited welfare for full time employment we find that treatment group members were less likely to upgrade their education along all dimensions high school completion enrolling in a community college or trade school and enrolling in university thus work first policies that encourage full time employment may reduce educational activity and may have adverse consequences on the long run earnings capacity of welfare recipients we also find that there was a substantial amount of educational upgrading in this population for instance among high school dropouts at the baseline 19 completed their diploma by the end of the demonstration finally we simulate the consequences of the earnings supplement in the absence of adverse effects on educational upgrading doing so alters the interpretation of the lessons from the ssp demonstration

the effect of taxes on labor supply in the underground economy this paper uses micro data from a randomized survey carried out in the metropolitan area of quebec city canada to analyze the decision to evade taxes and work in the underground economy the results indicate that taxes distort labor market activities away from the regular sector to the underground sector but the distortion is small for the average worker the distortion is large however for particular groups of the population such as welfare claimants copyright 1994 by american economic association

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

the impact of body weight on occupational mobility and career development this paper examines the relationship between individuals weight and their employment decisions over the life cycle i estimate a dynamic stochastic model of individuals annual joint decisions of occupation hours worked and schooling the model allows body weight to affect non monetary costs switching costs and distribution of wages for each occupation and also allows individuals employment decisions to affect body weight i use conditional density estimation to formulate the distributions of wages and body weight evolution i find that heavier individuals face higher switching costs when transitioning into white collar occupations earn lower returns to experience in white collar occupations and earn lower wages in socially intensive jobs simulating the model with estimated parameters decreased occupational mobility accounts for 10 percent of the obesity wage gap while contemporaneous wage penalties for body weight are small the cost over the life cycle is substantial an exogenous increase in initial body mass by 20 percent leads to a 10 percent decrease in wages over the life course

the dog that did not bark the eitc for single mothers in the netherlands abstract we study the extension of an eitc for single mothers in the netherlands to mothers with a youngest child 12 to 15 years of age this reform increased the net income gain of moving into employment for the treatment group by 31 using both dd and rd we show that this reform had a negligible effect on labour participation with tight confidence intervals around zero our results are at odds with a number of related studies this finding may be due to our treatment group of single mothers of which the youngest child is relatively old or because the reform we consider was less salient furthermore related studies typically study changes in a tax credit which was part of a broader reform package making it harder to isolate the effect of the tax credit also we show that using single women without children as the control group as is commonly done in related studies can be problematic

share contracts and their rationale lessons from marine fishing most of the existing literature on share contracts is based explicitly or implicitly on agriculture a sector in which share contracts are seldom dominant and apparently on the decline moreover since agricultural activities have some rather special characteristics the purpose of the present article is to analyse contractual choice and especially the choice of share contracts in a sector in which share contracts are dominant namely fishing in the process of explaining the dominance of share contracts in fishing the article also explains a some heretofore neglected features of these share contracts such as the way in which shares are calculated and the treatment of repair and maintenance expenditures b the nature and extent of interlinked transactions c the exceptional cases where share contracts are not used and d the relevance of varying environmental conditions and especially those of poor developing countries to the nature of contracts in fishing and to the differences therein between

bounding the labor supply responses to a randomized welfare experiment a revealed preference approach we study the impact of connecticut s jobs first jf welfare reform experiment on the labor supply decisions of a sample of welfare applicants and recipients although the experiment identies the distribution of choices made in the absence and presence of reform each woman s counterfactual choice is unknown we show that economic theory restricts the set of counterfactual choices compatible with each woman s actual choice we use these restrictions to develop bounds on the frequency of intensive and extensive margin responses to reform our results indicate that the jf experiment led some women to work and others to reduce their earnings

identifying the response of fertility to financial incentives summary while using financial incentives to increase fertility has become relatively common the effects of such policies are difficult to assess we propose an identification strategy that relies on the fact that the variation in wages induces variation in benefits and tax credits among comparable households we implement our approach by estimating a discrete choice model of female participation and fertility using individual data from the french labor force survey and a detailed representation of the french tax benefit system our results suggest that financial incentives have had a significant effect on fertility decisions in france as an example we simulate the effects of an additional unconditional child credit of 150 euros per month the effects are strongest for the third child copyright 2013 john wiley sons ltd

affirmative action in higher education how do admission and financial aid rules affect future earnings this paper addresses how changing the admission and financial aid rules at colleges affects future earnings i estimate a structural model of the following decisions by individuals where to submit applications which school to attend and what field to study the model also includes decisions by schools as to which students to accept and how much financial aid to offer simulating how black educational choices would change were they to face the white admission and aid rules shows that race based advantages had little effect on earnings however removing race based advantages does affect black educational outcomes in particular removing advantages in admissions substantially decreases the number of black students at top tier schools while removing advantages in financial aid causes a decrease in the number of blacks who attend college

reassessing the climate change cooperation performance via a non compensatory composite indicator approach abstract international cooperation is the key factor in mitigating the climate change impacts on the human and environmental system climate change cooperation index can incentivize countries to embrace international agreements to achieve an efficient mitigation this paper argues that non compensatory rule can generate a more theoretically meaningful climate change cooperation index if the preferential independence between indicators cannot be guaranteed sub indicator weights are assigned with the meaning of the importance and compensability between sub indicator is not desirable hence this paper introduces a non compensatory composite indicator approach to construct a new climate change cooperation index for cooperation performance evaluation the main results are reported and discussed an uncertainty analysis shows that the non compensatory index has relatively good robustness on both weight factor and data inaccuracy

assessing the effects of reemployment bonuses on job search a regression discontinuity approach abstract this study examines the impacts of reemployment bonuses that is the incentive payments to unemployment insurance ui recipients who find a job within a specified period using korean data a sharp discontinuity in treatment assignment at age 55 identifies the effect of increased reemployment bonuses on unemployment duration and on subsequent job duration the results indicate that increases in the reemployment bonus boost the job finding hazards of ui claimants early in their unemployment spells during the bonus qualification period and significantly shorten the duration of ui spells by 0 16 to 0 42 months 0 68 to 1 82 weeks in addition employment stability is not significantly affected by an increased bonus which implies no negative influence of the bonus on subsequent job match quality the simulated estimates show that the increase in tax revenue and the decrease in ui benefit payment caused by the behavioral response of ui recipients are large enough to offset the increased cost of the reemployment bonus

racial labor market gaps the role of abilities and schooling choices this paper studies the relationship between abilities schooling choices and black white differentials in labor market outcomes the analysis is based on a model of endogenous schooling choices agents schooling decisions are based on expected future earnings family background and unobserved abilities earnings are also determined by unobserved abilities the analysis distinguishes unobserved abilities from observed test scores the model is implemented using data from the nlsy79 the results indicate that even after controlling for abilities there exist significant racial labor market gaps they also suggest that the standard practice of equating observed test scores may overcompensate for differentials in ability

how does parental leave affect fertility and return to work evidence from two natural experiments this paper analyzes the effects of changes in the duration of paid job protected parental leave on mothers higher order fertility and postbirth labor market careers identification is based on a major austrian reform increasing the duration of parental leave from one year to two years for any child born on or after july 1 1990 we find that mothers who give birth to their first child immediately after the reform have more second children than prereform mothers and that extended parental leave significantly reduces return to work employment and earnings also decrease in the short run but not in the long run fertility and work responses vary across the population in ways suggesting that both cash transfers and job protection are relevant increasing parental leave for a future child increases fertility strongly but leaves short run postbirth careers relatively unaffected partially reversing the 1990 extension a second 1996 reform improves employment and earnings while compressing the time between births

carrot and stick how reemployment bonuses and benefit sanctions affect exit rates from welfare summary to increase the exit from welfare benefit recipients in the municipality of rotterdam were exposed to various financial incentives once their benefit spell exceeded one year welfare recipients were entitled to a re employment bonus if they found a job that lasted at least 6 months however they could also be punished for noncompliance with eligibility requirements and face a sanction i e a temporary reduction of their benefits we find that the financial sticks in the form of benefit sanctions were effective in stimulating the exit from welfare while the financial carrots in the form of re employment bonuses were not copyright 2011 john wiley sons ltd

public spending on education and the incentives for student achievement we build a model where homogeneous workers can accumulate human capital by investing in education schools combine public resources and individual effort to generate productive skills if skills are imperfectly compensated then in equilibrium students may under invest in effort we examine the effect on human capital accumulation of three basic education finance policies increased tuition subsidies may not be beneficial because they increase enrolment but they may lower the incentives for student achievement hence the skill level policies directed at enhancing the productivity of education or making degrees more informative are more successful at improving educational outcomes

the impact of adaptation on the stability of international environmental agreements we examine the stability of international environmental agreements that include clauses pertaining to both adaptation and mitigation measures we assume that adaptation requires a prior irreversible investment and presents the characteristics of a private good by reducing a country s vulnerability to the impact of pollution while mitigation policies produce a public good by reducing the total amount of pollution using a stylized model we show that adaptive measures can be used strategically and that their inclusion in environmental agreements enhances agreement stability and can even lead to full cooperation we examine the robustness of agreements including both adaptation and mitigation measures against renegotiation finally we evaluate how including adaptive measures for climate change in international environmental agreements affects welfare and overall pollution

education and crime over the life cycle we compare two large scale policy interventions aimed at reducing crime subsidizing high school completion and increasing the length of prison sentences to this purpose we use a life cycle model with endogenous education and crime choices we apply the model to property crime and calibrate it to u s data we find that targeting crime reductions through increases in high school graduation rates entails large efficiency and welfare gains these gains are absent if the same crime reduction is achieved by increasing the length of sentences we also find that general equilibrium effects explain roughly one half of the reduction in crime from subsidizing high school

viewpoint estimating the causal effects of policies and programs estimation inference and interpretation of the causal effects of programs and policies have all advanced dramatically over the past 25 years we highlight three particularly important intellectual trends an improved appreciation of the substantive importance of heterogeneous responses and of their methodological implications a stronger focus on internal validity brought about by the credibility revolution and the scientific value that follows from grounding estimation and interpretation in economic theory we discuss a menu of commonly employed partial equilibrium approaches to the identification of causal effects emphasizing that the researcher s central intellectual contribution always consists of making an explicit case for a specific causal interpretation given the relevant economic theory the data the institutional context and the economic question of interest we also touch on the importance of general equilibrium effects and full cost benefit analyses

are two carrots better than one the effects of adding employment services to financial incentive programs for welfare recipients the self sufficiency project ssp was a social experiment conducted in two canadian provinces during the 1990s that tested a generous financial incentive program for welfare recipients a little known subsidiary experiment called ssp plus had a three way design that tested the incremental effect of adding employment services to the generous financial incentive program employment services are viewed by many welfare analysts as an important component of an overall strategy for helping welfare recipients escape poverty and achieve stable employment this paper presents the results of the ssp plus experiment adding employment services encouraged more people to take up the earnings supplement and it appeared to have long term effects on full time employment and welfare receipt this might be because the services improved the jobs people obtained compared to program participants who lacked the added services ssp plus members had higher earnings and wage rates and also appear to have held more sustainab

estimating the effects of a time limited earnings subsidy for welfare leavers in the self sufficiency project ssp welfare demonstration members of a randomly assigned treatment group could receive a subsidy for full time work the subsidy was available for 3 years but only to people who began working full time within 12 months of random assignment a simple optimizing model suggests that the eligibility rules created an establishment incentive to find a job and leave welfare within a year of random assignment and an entitlement incentive to choose work over welfare once eligibility was established building on this insight we develop an econometric model of welfare participation that allows us to separate the two effects and estimate the impact of the earnings subsidy on welfare entry and exit rates among those who achieved eligibility the combination of the two incentives explains the time profile of the experimental impacts which peaked 15 months after random assignment and faded relatively quickly our findings suggest that about half of the peak impact of ssp was attributable to the establishment incentive despite the extra work effort generated by ssp the program had no lasting impact on wages and little or no long run effect on welfare participation

efficiency and equity tradeoffs incentive compatible contracts revisited abstract while the efficiency of certain contractual choices has been well established less attention has been given to the distributional outcomes of contracting in natural resource based industries data from a case study of seed gatherers in honduras demonstrates that workers paid under a relative payment system receive an earnings premium of about 25 of which 40 cannot be explained by observed differences in worker productivity a theoretical agency model is outlined in the appendix to explain why workers under tournaments necessarily enjoy a higher return than those under piece rates implying a more skewed income distribution as suggested in the efficiency wage literature

measuring the effect of subsidized training programs on movements in and out of employment despite over two decades of u s experience in operating large scale subsidized training programs for low income and unemployed workers the effects of these programs are still highly controversial the controversy arises from the difficulty of specifying the model of participant outcomes in the absence of training that is necessary in any nonexperimental program evaluation in this paper we suggest that some of these difficulties may be overcome by focusing on a very simple measure of outcomes namely the probability of employment we present a variety of estimates of the effect of training on the probability of employment for the 1976 cohort of adult male participants in the comprehensive employment and training act ceta program our methods range from a simple comparison of pre and post training employment probabilities between trainees and nonparticipants to a fully specified first order markov model of employment probabilities with individual heterogeneity there is consistent evidence across methods that ceta participation increased the probability of employment in the three years after training by from 2 to 5 percentage points classroom training programs appear to have had significantly larger effects than on the job programs although the estimated effects of both kinds of programs are positive we also find that movements in and out of employment for trainees and nonparticipants are reasonably well described by a first order process conditional on individual heterogeneity in the context of this model ceta participation appears to have increased both the probability of moving into employment and the probability of continuing employment

does wealth explain black white differences in early employment careers in this article i inquire about the effects initial wealth has on black white differences in early employment careers i set up a dynamic model in which individuals simultaneously search for a job and accumulate wealth and fit it to data from the national longitudinal survey 1979 cohort regime changes and decompositions of racial differences reveal that differences in the labor market environment and in preferences account fully for racial gaps in wealth and in wages persisting several years after high school graduation differences in initial wealth partially explain differences in early employment careers

the return to schooling in structural dynamic models a survey this papers contains a survey of the recent literature devoted to the returns to schooling within a dynamic structural framework i present a historical perspective on the evolution of the literature from early static models set in a selectivity framework willis and rosen 1979 to the recent literature stimulated by keane and wolpin 1997 and which uses stochastic dynamic programming techniques after reviewing the literature thoroughly i compare the structural approach with the iv experimental approach i present their commonalities and i also discuss their fundamental di8erences to get an order of magnitude most structural estimates reported for the us range between 4 and 7 per year on the other hand iv estimates between 10 and 15 per year are often reported the discrepancy prevails even when comparable if not identical data sets are used the discussion is focussed on understanding this divergence the distinction between static and dynamic model specifications is a recurrent theme in the analysis i argue that the distinction between the iv approach and the structural approach may be coined in terms of a trade o8 between behavioral and statistical assumptions for this reason and unless one has very specific knowledge of the true data generating process it is neither possible nor sensible to claim which approach to estimation is more flexible more precisely i show that structural and iv approaches differ mainly at the level of i the compatibility of the underlying models with truly dynamic behavior ii the role of heterogeneity in ability and tastes iii the consideration of post schooling opportunities and iv the specification and interpretation of the mincer wage equation

the employment effects of low wage subsidies abstract low wage subsidies are often proposed as a solution to the unemployment problem among the low skilled but the empirical evidence on their effects is still scarce this paper examines the employment effects of a finnish payroll tax subsidy scheme which is targeted at the employers of older full time low wage workers the system s clear eligibility criteria open up an opportunity for a reliable estimation of the causal impacts of the subsidy scheme our results indicate that the subsidy system had no effect on the employment rate or wages of the eligible groups but it increased slightly working hours among those already at work

the effects of single mothers welfare use and employment decisions on children s cognitive development i introduction in this article we study the effects of low skilled single mothers welfare use and employment choices during their children s early years on their children s cognitive development we use participation in aid to families with dependent children afdc and after 1996 temporary aid to needy families tanf to represent welfare use before 1996 afdc was one of the largest welfare programs in the united states in addition to cash benefits participation in the afdc program often assured eligibility for other programs such as head start food stamps and medicaid 1 in 1996 the personal responsibility and work opportunity reconciliation act prwora ended afdc replacing it with the tanf program even though prwora introduced a time limit on welfare benefits tanf is still one of the most expansive government programs and participation in tanf remains highly correlated with other program participation welfare is used mostly by low skilled single mothers with low incomes who are likely to be highly constrained in terms of resources to invest in their children s development welfare program participation can provide these mothers with monetary and nonmonetary resources that can be very important to early nurturing but does welfare use benefit the development of the participating children through provision of these resources we analyze the relationship between a mother s welfare use and employment decisions during the first 5 years of her child s life and the child s first observed standardized mathematics score from the peabody individual achievement test piat math it is important to identify contributors to early cognitive development since this has been shown to be a strong predictor of long term achievement in particular early test scores are strongly correlated with educational attainment criminal activity salaries and out of wedlock pregnancy see reviews by duncan and brooks gunn 1997 haveman and wolfe 1995 and currie and thomas 1999 we use math scores on piat test as our primary measure of attainment primarily because they have been shown to be predictors of not only later math scores but also other academic achievement for example see claessens duncan and engel 2009 and duncan et al 2007 we contribute to the literature in three ways first the effects of a mother s decisions in our attainment function are allowed to interact with the child s observed innate ability which we will define later this allows us to obtain distributions for the effects of work and welfare by children s innate ability in addition to a single coefficient that measures only the effect at the mean level to our knowledge our article is one of few that allow for this flexibility bernal 2008 and bernal and keane 2010 2011 find that the marginal effects of a mother s work and child care choices decrease with the innate ability of the child that is although the effects on a child with average innate ability may be small and positive there are significantly larger positive impacts for the children with below average innate ability and large negative effects for children with above average innate ability second we model the child s attainment as a function of the mother s cumulative inputs a child s attainment observed when they turn six is determined by the cumulative welfare use and work experiences of the first 20 quarters 5 years after birth the longer multiple periods not only enable us to identify the effects using a much richer variation in mothers decisions but also allow us to investigate the influence of different intensity levels of work and welfare use third we model multiple channels through which a mother s decisions can affect her child s attainment including direct monetary benefits available for each child parental time and exemplary behavior role model effects captured by the mother s employment and non pecuniary benefits from in kind transfer programs

eliminating race differences in school attainment and labor market success in this article we provide quantitative evidence on the effects of monetary incentive schemes designed to reduce racial differences in school attainment and earnings our analysis is based on the structural estimation of a dynamic model of schooling work and occupational choice decisions over the life cycle we consider two recent proposals that although not specifically targeted to blacks can be expected to have differential racial impacts one proposal suggested by robert reich provides a high school graduation bonus to youths from lower income families the other suggested by edmund phelps provides wage subsidies to low wage workers

adapting to climate change is cooperation good for the environment we consider the formation of an international environmental agreement focusing on adaptation to climate change members of the agreement fully share their knowledge and determine their investments in r d by maximizing their joint welfare while non members optimize their individual payoffs using a three stage game formalism we obtain that a large coalition is achievable and that total emissions increase with the size of the agreement the welfare implications are parameter dependent

financial aid borrowing constraints and college attendance evidence from structural estimates the idea that borrowing constraints may preclude low income youth from attending college is widespread here i will review some recent work on the importance of borrowing constraints and the impact of financial aid programs i e guaranteed student loans and tuition subsidies designed to counteract them this work suggests that borrowing constraints have little effect on college attendance decisions there is evidence that tuition subsidies play a modest role in reducing inequality in schooling and earnings most inequality however appears to be driven by unequal human capital accumulation prior to college going age empirical work on college attendance decisions has consistently produced two findings i parents income helps predict college attendance even conditional on other observed characteristics of youth and ii the effect of tuition on the probability of college attendance is greater for children from low income families there is some mixed evidence that iii the rate of return to education is higher for low income youth these findings are commonly viewed as strong evidence for borrowing constraints recent work by stephen cameron and james heckman 1998 challenges these findings furthermore other recent work keane and kenneth wolpin 2001 shows that they are compatible with a model in which liquidity constraints have a negligible impact on college attendance rates to understand this work it is useful to consider a very simple discrete choice model of college attendance decisions the model has the following features

heterogeneous treatment and self selection in a wage subsidy experiment abstract the self sufficiency project ssp is a research and demonstration project that offered a generous time limited income supplement to randomly selected welfare applicants under two conditions the first the eligibility condition required that they remain on welfare for at least 12 months the second the qualification condition required that they find a full time job within 12 months after establishing eligibility in this paper we focus on a neglected and important feature of the program namely that the financial reward for becoming qualified is inversely related to the expected wage rate under very simple assumptions we show that those who have a low expected wage rate have a clear incentive to establish eligibility empirical non parametric evidence strongly suggests that individuals self select into eligibility we jointly estimate a participation equation and a wage equation that are correlated through individual random effects our results show that the omission of self selectivity into qualification translates into slightly underestimated treatment effects

the effects of youth employment evidence from new york city lotteries programs to encourage labor market activity among youth including public employment programs and wage subsidies like the work opportunity tax credit can be supported by three broad rationales they may i provide contemporaneous income support to participants ii encourage work experience that improves future employment and or educational outcomes of participants and or iii keep participants out of trouble we study randomized lotteries for access to the new york city nyc summer youth employment program syep the largest summer youth employment program in the united states by merging syep administrative data on 294 100 lottery participants to irs data on the universe of u s tax records to new york state administrative incarceration data and to nyc administrative cause of death data in assessing the three rationales we find that i syep participation causes average earnings and the probability of employment to increase in the year of program participation with modest contemporaneous crowdout of other earnings and employment ii syep participation causes a modest decrease in average earnings for three years following the program and has no impact on college enrollment and iii syep participation decreases the probability of incarceration and decreases the probability of mortality which has important and potentially pivotal implications for analyzing the net benefits of the program jel codes j13 j45 j38 j21

the role of labor and marriage markets preference heterogeneity and the welfare system in the life cycle decisions of black hispanic and white women using data from the nlsy79 we structurally estimate a dynamic model of the life cycle decisions of young women the women make sequential joint decisions about school attendance work marriage fertility and welfare participation we use the model to perform counterfactual simulations designed to shed light on three questions 1 how much of observed minority majority differences in behavior can be attributed to differences in labor market opportunities marriage market opportunities and preference heterogeneity 2 how does the welfare system interact with these factors to augment those differences 3 how can new cohorts that grow up under the new welfare system temporary aid for needy families be expected to behave compared to older cohorts

tax policy reform the role of empirical evidence to understand the role of evidence in tax policy design this paper organizes the empirical analysis of reform under five loosely related headings i key margins of adjustment ii measurement of effective tax rates iii the importance of information and complexity iv evidence on the size of responses and v implications from theory for tax design the context for the discussion is the recently published mirrlees review of tax reform although the review focused on all aspects of tax reform this paper highlights the taxation of earnings it also comments on earnings taxation in the context of vat base broadening reforms and the taxation of capital

an economic model of welfare stigma perhaps the most basic assumption of the economic theory of consumer demand is that more is better than less virtually all of the major propositions of consumer theory can in a certain sense be derived from the assumption that goods are good interestingly however this tenet seems to be violated by the behavior of many individuals in the low income population for many turn out to be eligible for a positive welfare benefit but do not in fact join the welfare rolls for example it has been estimated that in 1970 only about 69 percent of the families eligible for afdc aid to families with dependent children participated in the program see richard michel 1980 the corresponding percentage for afdc u the program for which families with an unemployed male are eligible was only 43 percent and the participation rate in the food stamp program was only 38 percent see maurice mcdonald 1977 this phenomenon has puzzled many investigators because such individuals do not locate on the boundaries of their budget sets consequently most investigators ignore the problem when studying the effects of welfare programs on behavior in this paper this seemingly irrational rejection of an increase in income is modeled as resulting from welfare stigma that is from disutility arising from participation in a welfare program per se 1 the existence of stigma has been amply documented in the sociological literature patrick horan and patricia austin 1974 lee rainwater 1979 where interviews of recipients have often uncovered feelings of lack of self respect and negative self characterizations from participation in welfare nevertheless this phenomenon has not been modeled and many questions consequently remain when is the disutility of participation strong enough to prevent participation shouldn t we expect individuals to weigh the disutility of participation against the potential benefit in their decisions what is the elasticity of participation with respect to the potential benefit also in a slightly different vein how are the work disincentives of welfare affected by stigma these questions have been given scant attention by economists yet they are crucial for our ability to predict the impact of various welfare programs on the lowincome population here these questions are addressed by modeling nonparticipation as a utility maximizing decision the model is developed and estimated for the afdc program 2 the model posits an individual utility function containing not just disposable income but

conditional choice probability estimation of dynamic discrete choice models with unobserved heterogeneity we adapt the expectation maximization algorithm to incorporate unobserved heterogeneity into conditional choice probability ccp estimators of dynamic discrete choice problems the unobserved heterogeneity can be time invariant or follow a markov chain by developing a class of problems where the difference in future value terms depends on a few conditional choice probabilities we extend the class of dynamic optimization problems where ccp estimators provide a computationally cheap alternative to full solution methods monte carlo results confirm that our algorithms perform quite well both in terms of computational time and in the precision of the parameter estimates

can variation in subgroups average treatment effects explain treatment effect heterogeneity evidence from a social experiment we assess whether welfare reform affects earnings only through mean impacts that are constant within but vary across subgroups this is important because researchers interested in treatment effect heterogeneity typically focus on estimating mean impacts that only vary across subgroups using a novel approach to simulating treatment group earnings under the constant mean impacts within subgroup model we find this model does a poor job of capturing treatment effect heterogeneity for connecticut s jobs first welfare reform experiment notably ignoring within group heterogeneitywould lead one to miss evidence that treatment effects are consistent with basic labor supply theory

what works a meta analysis of recent active labor market program evaluations we summarize the estimates from over 200 recent studies of active labor market programs we classify the estimates by type of program and participant group and distinguish between three different post program time horizons using regression models for the estimated program effect for studies that model the probability of employment and for the sign and significance of the estimated effect for all the studies in our sample we conclude that 1 average impacts are close to zero in the short run but become more positive 2 3 years after completion of the program 2 the time profile of impacts varies by type of program with larger average gains for programs that emphasize human capital accumulation 3 there is systematic heterogeneity across participant groups with larger impacts for females and participants who enter from long term unemployment 4 active labor market programs are more likely to show positive impacts in a recession

capitalism and kinship do institutions matter in the labor market this study examines the determination of employment and pay on capitalist and kinship vessels in the new england fishing industry capitalist vessels resemble standard competitive firms in the way that employment and pay respond to changing market conditions kinship vessels operate under work guarantees and income sharing rules these differences in institutional rules lead to different patterns of income employment growth and labor adjustment the study shows how an understanding of the institutional structure of labor markets can contribute to the design of public policies to facilitate adjustment to change and to promote industrial growth

when financial work incentives pay for themselves evidence from a randomized social experiment for welfare recipients abstract this paper summarizes early findings from a social experiment that provided financial incentives for new welfare recipients to leave welfare and work full time the financial incentive was essentially a negative income tax with a requirement that people work at least 30 h week early results show that the financial incentive increased full time employment earnings and income and reduced poverty furthermore at the end of the period discussed in this paper the program was paying for itself through increased tax revenues

the value of school facility investments evidence from a dynamic regression discontinuity design author s cellini stephanie riegg ferreira fernando rothstein jesse abstract despite extensive public infrastructure spending surprisingly little is known about its economic return in this paper we estimate the value of school facility investments using housing markets standard models of local public goods imply that school districts should spend up to the point where marginal increases would have zero effect on local housing prices our research design isolates exogenous variation in investments by comparing school districts where referenda on bond issues targeted to fund capital expenditures passed and failed by narrow margins we extend this traditional regression discontinuity approach to identify the dynamic treatment effects of bond authorization on local housing prices student achievement and district composition our results indicate that california school districts underinvest in school facilities passing a referendum causes immediate sizable increases in home prices implying a willingness to pay on the part of marginal homebuyers of 1 50 or more for each 1 of capital spending these effects do not appear to be driven by changes in the income or racial composition of homeowners and the impact on test scores appears to explain only a small portion of the total housing price effect c 2010 by the president and fellows of harvard college and the massachusetts institute of technology

estimates of the economic returns to schooling from a new sample of twins this paper uses a new survey to contrast the wages of genetically identical twins with different schooling levels multiple measurements of schooling levels were also collected to assess the effect of reporting error on the estimated economic returns to schooling the data indicate that omitted ability variables do not bias the estimated return to schooling upward but that measurement error does bias it downward adjustment for measurement error indicates that an additional year of schooling increases wages by 12 to 16 percent a higher estimate of the economic returns to schooling than has been previously found copyright 1994 by american economic association

effects of permanent and transitory tax changes in a life cycle labor supply model with human capital i examine effects of labor income taxation in life cycle models with human capital accumulation in this case the opportunity cost of time equals the wage plus returns to work experience this has several interesting consequences first the data appear consistent with larger labor supply elasticities than prior work suggests second contrary to conventional wisdom permanent tax changes can have larger effects on current labor supply than temporary changes third human capital dampens responses of young workers to transitory tax changes fourth labor supply elasticities increase with age fifth human capital amplifies the effect of permanent tax changes in the long run

estimating welfare effects consistent with forward looking behavior part i lessons from a simulation exercise an extensive literature in economics seeks to determine the quantitative impact of welfare benefits on economic and demographic behaviors most studies adopt a static choice framework to motivate their empirical specifications the behaviors that are studied however have both immediate and long term consequences if potential welfare recipients are forward looking they will consider these long term consequences when making current decisions in this paper we investigate the implications of the existence of forward looking behavior for estimation methodology in the companion paper that follows we estimate the effect of welfare on those decisions adopting an empirical specification that is consistent with forward looking behavior and interpretable within that framework

do wage subsidies provide a stepping stone to employment for recent college graduates evidence from a randomized experiment in jordan abstract this study examines the impact of a randomized experiment in jordan in which female community college graduates were assigned to receive a wage subsidy voucher the wage voucher led to a 38 percentage point increase in employment in the short run but the average effect is much smaller and no longer statistically significant after the voucher period has expired the extra job experience gained as a result of the wage subsidy does not provide a stepping stone to new jobs for these recent graduates which appears to be due to productivity levels not rising above a binding minimum wage

estimating equilibrium effects of job search assistance identifying policy relevant treatment effects from randomized experiments requires the absence of spillovers between participants and nonparticipants sutva or variation in observed treatment levels we find that sutva is violated for a danish activation program for unemployed workers using a difference in differences model we show that nonparticipants in the experiment regions find jobs more slowly after the introduction of the program than workers

the employment dynamics of disadvantaged women evidence from the sipp understanding the employment dynamics of disadvantaged families is increasingly important we estimate duration models describing these dynamics for disadvantaged single mothers and use them to conduct a rich set of counterfactual analyses we use a misreporting model to correct for seam bias the problem that too many transitions are reported between reference periods in panel data we find effects of demographics minimum wages unemployment rates and maximum welfare benefits but not policy changes introduced through state welfare waivers on employment dynamics we find that two commonly used ad hoc methods of addressing seam bias perform substantially worse than our approach

adaptation and international environmental agreements we study the impact of collective effort in r d in adaptation technologies and also spillover effects on formation and size of stable international environmental agreements ieas our results suggest that it is possible to have more than one size of stable iea we can achieve a superior equilibrium i e the grand coalition if countries manage to keep knowledge spillovers low and arrange a minimum ratification threshold this threshold is defined endogenously we also shed light on the effects of two sided spillover on global welfare and the size of stable ieas

what determines family structure i introduction the most prevalent type of family structure in which children in the united states are raised today is the traditional one in which both biological parents are present in the home and married but in the past 30 40 years it has become increasingly common for children to experience alternative family structures such as living with the mother with no father present the mother and a stepfather and cohabiting parents children who grow up in a family with married biological parents have better education employment marriage childbearing and psychological outcomes on average than their counterparts who spend substantial parts of childhood living in alternative family structures 1 these differences are generally quite large and dwarf the effects of income and maternal employment the evidence suggests that at least part of the association between family structure and child outcomes is causal there is much still to be learned about the consequences of growing up in alternative family structures but there is a consensus that family structure matters for child development in contrast there is much less known about the determinants of family structure the proximate determinants of family structure are well studied demographic behaviors union formation and dissolution transition from cohabitation to marriage and fertility both in and outside of unions but the implications of adult demographic behaviors for the family structure experiences of children depend crucially on interactions among these behaviors for example the impact on a child of being born out of wedlock is likely to depend on whether the mother and biological father subsequently marry or cohabit and if so how soon after the birth of the child the impact on a child of the dissolution of a union may depend on whether the man in the union was the child s biological father or a stepfather and on the duration of the union economic theories of family formation and dissolution suggest a number of observable factors that affect the demographic behaviors that determine family structure 2 these include the wage rates available to men and women the tax and transfer incentives to cohabit marry and bear children the legal environment governing divorce and child support provided by absent parents and the state of the marriage market many studies have examined the effects of these factors on the family structure experiences of children but most have taken a narrow approach for example a typical study examines the impact of changes over time in one or two determinants of family structure without considering the implications of simultaneous changes in other factors most studies examine only one or two of the key demographic behaviors that determine the family structure experienced by children for example one study might focus only on entry to cohabitation and marriage whereas another study examines childbearing while single and a third study analyzes marital dissolution in this article we propose a new approach to analyze the determinants of the family structure experiences of children our approach has four distinguishing features first we jointly model union formation union dissolution and childbearing decisions previous analyses have integrated some of these behaviors in a single model but none has integrated the full range of behaviors needed for a thorough analysis of family structure a major feature of change in recent years has been de linking of marriage and childbearing decisions hence it is crucial to recognize as emphasized by ellwood and jencks 2004 that marriage and childbearing are in fact distinct decisions and that treating single parenthood as one decision rather than the consequence of related but distinct union and childbearing decisions misses key elements of changes in behavior furthermore bumpass and lu 2000 point out that a substantial part of the increase in single parenthood in the last three decades can be accounted for by a rise in the presence of children with cohabiting parents but child outcomes are worse in cohabitation than marriage other things equal

welfare use when approaching the time limit time limits reduce caseloads directly by cutting off benefits after a time limited usage but may also provide families with an incentive to reduce welfare use in order to conserve their benefits both effects depend on the stock of remaining months of eligibility this is the first empirical study to incorporate information on this crucial determinant of takeup and eligibility under time limits accounting for the potential endogeneity of an individual s past use time limits are estimated to have decreased welfare use by 25 percent between 1996 and 2003 roughly one fifth of this reduction is due to behavioral responses

life cycle labour supply with human capital econometric and behavioural implications i examine econometric and behavioural implications of including human capital in the life cycle labour supply model with human capital the wage is no longer the price of time which is instead the wage plus returns to work experience this has important implications first labour supply elasticities become functions of both preference and wage process parameters one cannot estimate them separately second the data appear consistent with larger elasticities than prior work suggests third contrary to conventional wisdom permanent tax changes can have larger effects on current labour supply than temporary changes fourth effects of permanent tax changes grow over time

assessing the impact of a wage subsidy for single parents on social assistance this paper studies the impact of a wage subsidy program aimed at long term social assistance recipients in quebec the program closely mimics the self sufficiency project and was implemented for a trial period of one year in 2002 we focus on the labour market transitions of the targeted population starting one year before the implementation of the program and up until the end of 2005 our results show that the duration of spells off social assistance increased while the duration of social assistance spells decreased slightly the response to the program varies considerably both with observed and unobserved characteristics

low wage employment subsidies versus the welfare state this paper is a brief for the introduction of a subsidy to any qualified firm for its use of low wage employees as a means to reduce the unemployment and raise the pay of disadvantaged workers there would be a case for such a wage subsidy in all the advanced market economies and certainly the american one regardless of recent trends the case has grown stronger however with the worsening of the relative wages and especially the unemployment rates of low age workers the globalization of investment and the bias of technical progress are the causes most often suggested i would add the growth of the welfare system the public entitlements to hospitalization to retirement and disability insurance and to the benefits labeled welfare in the narrow sense since this factor tends to be overlooked i devote section i to it section ii proceeds to the case for a low wage employment subsidy it will be clear that the beneficial effects of the subsidy on disadvantaged workers are the mirror opposite of the harmful side effects of the welfare system side effects that the subsidy would counteract i side effects of the welfare system

the economic returns to an mba because mba programs require work experience before admittance prior wages can be exploited to disentangle the return to the degree from unobserved productivity we find that controlling for individual fixed effects generally reduces the estimated returns to an mba particularly for those in top programs however for full time mba students attending schools outside of the top 25 the estimated returns are higher when we control for individual fixed effects we show that there is some evidence that those who take the gmat but do not obtain an mba are stronger in dimensions such as workplace skills that are not easily measured

estimating incentive and welfare effects of nonstationary unemployment benefits the distribution of unemployment duration in our equilibrium matching model with spell dependent unemployment benefits displays time varying exit rates building on semi markov processes we translate these rates into an expression for the aggregate unemployment rate structural estimation using german microdata allows us to discuss the effects of an unemployment benefit reform hartz iv the reform reduced unemployment by less than 0 1 percentage points contrary to general beliefs the net wage for most skill and regional groups increased taking the insurance effect of unemployment benefits into account however the reform is welfare reducing for 76 of workers

assessing the impact of a school subsidy program in mexico using a social experiment to validate a dynamic behavioral model of child schooling and fertility this paper uses data from a randomized social experiment in mexico to estimate and validate a dynamic behavioral model of parental decisions about fertility and child schooling to evaluate the effects of the progresa school subsidy program and to perform a variety of counterfactual experiments of policy alternatives our method of validation estimates the model without using post program data and then compares the model s predictions about program impacts to the experimental impact estimates the results show that the model s predicted program impacts track the experimental results our analysis of counterfactual policies reveals an alternative subsidy schedule that would induce a greater impact on average school attainment at similar cost to the existing program

the impact of the self sufficiency project on the employment behaviour of former welfare recipients the self sufficiency project ssp was a canadian randomized trial in which the program group had 12 months to find full time employment in order to qualify for a subsidy that roughly doubled their pre tax earnings for the next three years we find evidence of significant impacts of ssp on non employment and employment durations for the treated group simulation results show an impact on the employment rate at 52 months after random assignment in the range of 7 to 11 percentage points this is approximately a 25 increase in the employment rate compared with having no treatment

better late than nothing some comments on deaton 2009 and heckman and urzua 2009 two recent papers deaton 2009 and heckman and urzua 2009 argue against what they see as an excessive and inappropriate use of experimental and quasi experimental methods in empirical work in economics in the last decade they specifically question the increased use of instrumental variables and natural experiments in labor economics and of randomized experiments in development economics in these comments i will make the case that this move towards shoring up the internal validity of estimates and towards clarifying the description of the population these estimates are relevant for has been important and beneficial in increasing the credibility of empirical work in economics i also address some other concerns raised by the deaton and heckman urzua papers

employment hours of work and the optimal taxation of low income families the optimal design of low income support is examined using a structural labour supply model the approach incorporates unobserved heterogeneity fixed costs of work childcare costs and the detailed non convexities of the tax and transfer system the analysis considers purely pareto improving reforms and also optimal design under social welfare functions with different degrees of inequality aversion we explore the gains from tagging and also examine the case for the use of hours contingent payments using the tax schedule for lone parents in the uk as our policy environment the results point to a reformed non linear tax schedule with tax credits only optimal for low earners the results also suggest a welfare improving role for tagging according to child age and for hours contingent payments although the case for the latter is mitigated when hours cannot be monitored or recorded accurately by the tax authorities acknowledgements this study is part of the research program of the esrc centre for the microeconomic analysis of public policy at the ifs we thank stuart adam mike brewer roger gordon guy laroque ian preston emmanuel saez florian scheuer seminar participants at harvard mit jerusalem niesr sole and participants in the mirrlees review the editor and the referees for helpful comments we are alone responsible for all errors and interpretations

modeling employment dynamics with state dependence and unobserved heterogeneity this study extends existing work on the dynamics of labor force participation by distinguishing between full time and part time employment and by allowing unobserved heterogeneity in the effects of previous employment outcomes children and education on labor supply behavior in addition unobserved heterogeneity may feature autocorrelation and correlated random effects the results reveal significant variation in the effects of children and education on labor supply behavior moreover the omission of random coefficients and autocorrelation biases estimates of state dependencies on average temporary shocks that increase the rate of part time employment lead subsequently to lower rates of nonemployment than do shocks that temporarily increase the rate of full time work the article has additional online supplementary material

viewpoint empirical evidence and tax policy design lessons from the mirrlees review this paper examines the role of evidence in drawing up the recommendations for tax reform in the mirrlees review the arguments are organised loosely under five related headings i key margins of adjustment ii measurement of effective tax rates iii the importance of information and complexity iv evidence on the size of responses v implications from theory for tax design although the mirrlees review focuses on all aspects of tax reform the focus is this paper is on the taxation of earnings with some examples drawn from the taxation of consumption and savings ce memoire examine le role des resultats dans la confection des recommandations pour la reforme fiscale dans l enquete mirrlees les arguments sont regroupes sous cinq rubriques i les importantes marges d ajustement ii la mesure des taux d imposition effective iii l importance de l information et de la complexite iv constat sur la taille des reponses et v les implications pour la theorie du design des politiques d imposition meme si l enquete mirrlees a examine tous les aspects de la reforme fiscale ce texte met l accent sur l impot sur les remunerations avec quelques exemples portant sur l impot sur la consommation et l epargne

conditional cash transfers the case of progresa oportunidades conditional cash transfer cct programs innovate by conditioning transfers to poor families on investments in the human capital of children and other family members the mexican cct program progresa oportunidades began in 1997 and has served as a model for many of the now over sixty countries with ccts around the world in large part due to its initial evaluation with an experimental design and numerous follow up studies this article reviews the literature on the development evaluation and findings of progresa oportunidades summarizing what is known about program effects taking into account corrections for multiple hypothesis testing

female labour supply human capital and welfare reform we estimate a dynamic model of employment human capital accumulation including education and savings for women in the united kingdom exploiting tax and benefit reforms and use it to analyze the effects of welfare policy we find substantial elasticities for labor supply and particularly for lone mothers returns to experience which are important in determining the longer term effects of policy increase with education but experience mainly accumulates when in full time employment tax credits are welfare improving in the u k increase lone mother labor supply and marginally reduce educational attainment but the employment effects do not extend beyond the period of eligibility marginal increases in tax credits improve welfare more than equally costly increases in income support or tax cuts

parental leave and mothers careers the relative importance of job protection and cash benefits parental leave regulations in most oecd countries have two key policy instruments job protection and cash benefits this paper studies how mothers return to work behavior and labor market outcomes are affected by alternative mixes of these key policy parameters exploiting a series of major parental leave policy changes in austria we find that longer cash benefits lead to a significant delay in return to work and that the magnitude of this effect depends on the relative length of job protection and cash benefits however despite their impact on time on leave we do not find a significant effect on mothers labor market outcomes in the medium run neither of benefit duration nor of job protection duration to understand the relative importance and interaction of the two policy instruments in shaping mothers return to work behavior we set up a non stationary job search model in which cash benefits and job protection determine decisions of when to return to work and whether or not to return to the pre birth employer despite its lean structure the model does surprisingly well in matching empirically observed return to work profiles the simulation of alternative counterfactual regimes shows that a policy that combines both job protection and benefits payments succeeds to induce mothers to spend some time with the child after birth without jeopardizing their medium run labor market attachment

distributional impacts of the self sufficiency project a large literature has been concerned with the impacts of recent welfare reforms on income earnings transfers and labor force attachment while one strand of this literature relies on observational studies conducted with large survey sample data sets a second makes use of data generated by experimental evaluations of changes to means tested programs much of the overall literature has focused on mean impacts in this paper we use random assignment experimental data from canada s self sufficiency project ssp to look at impacts of this unique reform on the distributions of income earnings and transfers ssp offered members of the treatment group a generous subsidy for working full time quantile treatment effect qte estimates show there was considerable heterogeneity in the impacts of ssp on the distributions of earnings transfers and total income this heterogeneity would be missed by looking only at average treatment effects moreover these heterogeneous impacts are consistent with the predictions of labor supply theory during the period when the subsidy is available the ssp impact on the earnings distribution is zero for the bottom half of the distribution the quantiles of the ssp earnings distribution are higher for much of the upper third of the distribution except at the very top where the quantiles of the earnings distribution are the same under either program or possibly lower under ssp further during the period when ssp receipt was possible the impacts on the quantiles of the distributions of transfer payments income assistance plus the subsidy and total income earnings plus transfers are also different at different points of the distribution in particular positive impacts on the quantiles of the transfer distribution are concentrated at the lower end of the transfer distribution while positive impacts on the quantiles of the income distribution are concentrated in the upper end of the income distribution impacts of ssp on these distributions were essentially zero after the subsidy was no longer available

structural empirical evaluation of job search monitoring to evaluate search effort monitoring of unemployed workers it is important to take account of post unemployment wages and job to job mobility we structurally estimate a model with search channels using a controlled trial in which monitoring is randomized the data include registers and survey data on search behavior we find that the opportunity to move to better paid jobs in employment reduces the extent to which monitoring induces substitution toward formal search channels in unemployment job mobility compensates for adverse long run effects of monitoring on wages we examine counterfactual policies against moral hazard like reemployment bonuses and changes of the benefits path

explaining and forecasting results of the self sufficiency project this paper studies the self sufficiency project ssp a controlled randomized experiment concerning welfare by estimating a model of endogenous skill accumulation multidimensional job opportunities and time varying opportunity costs of labour market time methods for estimating dynamic programming models with unobserved heterogeneity are extended to account for unexpected policy interventions and endogenous sample selection and initial conditions parameters are identified and consistently estimated by imposing optimal responses to the exact form of the ssp earnings supplement and the experimental program which induces exogenous variation between treatment groups and within groups as treatment progresses the estimated model tracks primary outcomes well in and out of sample except for underestimating trends in the sample of new welfare applicants predictions from counterfactual experiments run counter to non structural results reported elsewhere and they suggest that details of the ssp s design are critical for interpretation of results the separate ssp plus treatment may have longer lasting and more generalized impacts than the in sample impacts suggest copyright oxford university press

the effect of social benefits on youth employment combining regression discontinuity and a behavioral model natural experiments provide robust identifying assumptions for the estimation of policy effects yet their use for policy design is often limited by the difficulty of extrapolating on the basis of reduced form estimates in this study we exploit an age condition in the eligibility for social assistance in france which lends itself to a regression discontinuity rd design we suggest making the underlying labor supply model explicit that is translating the reduced form discontinuity in terms of discontinuous changes in disposable incomes this exercise shows the potential of combining natural experiments and behavioral models in particular we can test the external validity of the combined approach we find that it predicts the effect of a subsequent reform which extends transfers to the working poor remarkably well the model is then used to simulate the extension of social assistance to young people and finds that a transfer program with an in work component would not create further disincentives to work in this population