iv quantile regression for group level treatments with an application to the distributional effects of trade we present a methodology for estimating the distributional effects of an endogenous treatment that varies at the group level when there are group level unobservables a quantile extension of hausman and taylor 1981 because of the presence of group level unobservables standard quantile regression techniques are inconsistent in our setting even if the treatment is independent of unobservables in contrast our estimation technique is consistent as well as computationally simple consisting of group by group quantile regression followed by two stage least squares using the bahadur representation of quantile estimators we derive weak conditions on the growth of the number of observations per group that are sufficient for consistency and asymptotic zero mean normality of our estimator as in hausman and taylor 1981 micro level covariates can be used as internal instruments for the endogenous group level treatment if they satisfy relevance and exogeneity conditions our approach applies to a broad range of settings including labor public finance industrial organization urban economics and development we illustrate its usefulness with several such examples finally an empirical application of our estimator finds that low wage earners in the united states from 1990 to 2007 were significantly more affected by increased chinese import competition than high wage earners

the incentive effects of medicaid on women s labor supply this paper investigates medicaid s impact on women s labor supply behavior while taking into account medicaid s link to the afdc program the data were extracted from the 1986 current population survey a majorfinding is that medicaid valued as government provided health insurance has a significant negative impact on an average female head s probability of working for instance a i0 percent increase in medicaid would reduce a head s probability of working by 9 to 1 3 percentage points contrary to expectations medicaid is found to have a generally insignificant effect on hours worked

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

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

benefits conditional on work and the nordic model abstract welfare benefits in the nordic countries are often tied to employment we argue that this is one of the factors behind the success of the nordic model where a comprehensive welfare state is associated with high employment in a general equilibrium setting the underlining mechanism works through wage moderation and job creation the benefits make it more important to hold a job thus lower wages will be accepted and more jobs created moreover we show that the incentive to acquire higher education improves further boosting employment in the long run these positive effects help in counteracting the negative impact of taxation through numerical simulations we show how this mechanism can contribute to explain the better labor market performance and more equitable income distribution of nordic countries compared to continental european ones

the effects of welfare and tax reform the material well being of single mothers in the 1980s and 1990s abstract the tax and welfare programs that provide income and in kind benefits to single mothers have changed dramatically in recent years these changes began as far back as the mid 1980s and culminated with the 1996 welfare law that ended welfare as we knew it these tax and welfare changes have sharply increased the employment of single mothers and cut welfare rolls however little is know about the effects of these policy changes on the material well being of single mothers and their children studies of those leaving welfare have found that a substantial percentage have problems paying rent purchasing enough food and paying utility bills other studies found a decline in income among the worst off single mothers after 1994 or 1995 the goal of this paper is to examine the material well being of single mothers and their families before and after recent welfare and tax reforms using data from two nationally representative household surveys we examine the consumption patterns of single mothers and their families from 1984 2000 we find that the material conditions of single mothers did not decline in recent years either in absolute terms or relative to single childless women or married mothers this pattern holds for the average single mother as well as for low educated single mothers at both the 15th and 25th percentiles of the consumption distribution in most cases our evidence suggests that the material conditions of single mothers have improved slightly

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

the impact of wind power generation on the electricity price in germany abstract this paper investigates the relationship between intermittent wind power generation and electricity price behaviour in germany using a garch model i evaluate the effect of wind electricity generation on the level and the volatility of the electricity price in an integrated approach the results show that variable wind power reduces the price level but increases its volatility this paper s results also indicate that regulatory change has stabilised the wholesale price the electricity price volatility has decreased in germany after a modification of the marketing mechanism of renewable electricity this gives confidence that further adjustments to regulation and policy may foster a better integration of renewables into the power system

accounting for the decline in afdc caseloads welfare reform or the economy we use state level monthly panel data to assess the relative contributions of the macroeconomy and welfare reform in accounting for the 1993 96 decline in aid to families with dependent children afdc caseloads our results suggest that the decline in per capita afdc caseloads is attributable largely to the economic conditions in states and not to waivers from federal welfare policies nationwide we attribute 66 percent of the decline to the macroeconomy however we do find substantial heterogeneity in the impact and timing of alternative waivers on afdc caseloads states with waivers impacting parental responsibilities experienced greater caseload declines than states with waivers that made work more attractive overall our model predicts that had it not been for the influence of economic factors welfare reform would not have led to any decrease in aggregate caseloads

reforming taxes and raising revenue part of the fiscal solution this paper reviews the fiscal outlook in the united states discusses why revenue increases are a critical aspect of any enduring fiscal solution and outlines constructive policies to reform the tax system and simultaneously raise revenues in particular this paper highlights the merits of curtailing income tax expenditures introducing a value added tax and imposing levies on consumption and production of non renewable energy copyright 2011 oxford university press

caught in the trap welfare s disincentive and the labor supply of single men abstract youth unemployment is particularly large in many industrialized countries and has dramatic consequences in both the short and long term while there is abundant evidence about the labor supply of married women and single mothers little is known about how young childless singles react to financial incentives the french minimum income revenu minimum d insertion rmi often accused of generating strong disincentives to work offers a natural setting to study this question since childless single individuals primarily males constitute the core group of recipients exploiting the fact that childless adults under age 25 are not eligible for this program we conduct a regression discontinuity analysis using french census data we find that the rmi reduces the participation of uneducated single men by 7 10 at age 25 we conduct an extensive robustness check and discuss the implications of our results for youth unemployment and current policy developments

the minimum wage in formal and informal sectors evidence from an inflation shock abstract i estimate the effect of the minimum wage on formal wages informal wages and employment in colombia i exploit an unexpected increase in the real minimum wage during 1999 my analysis combines unconditional quantile regressions with a differences in differences design i find evidence of wage responses for wages close to the minimum wage the increases are present in both the informal and formal sectors and are larger in the formal one wages around the minimum increase by around 3 percent in the formal sector for a 10 percentage points larger minimum wage incidence and by around 1 percent in the informal sector these increases are smaller than those implied by full compliance to minimum wage policy but positive for some unaffected workers this suggests employers partially comply with the minimum wage and use it as a reference i find slight negative employment effects on the informal sector but not on the formal sector the effects in the informal sector are not driven by cross sectoral effects the results suggest the minimum wage has a direct impact on the informal labor market although they may not apply to minimum wage changes in other countries or contexts or to larger minimum wage increases

a model of labor supply fixed costs and work schedules abstract to analyze labor supply allocations we propose a three dimensional labor supply framework that distinguishes between hours worked per day days worked per week and workweeks individuals make labor supply choices given heterogeneous schedule dependent fixed costs of work the three margins are not perfect substitutes leisure on days not worked in a workweek has the largest weight in preferences leisure on weeks off has the smallest weight we use the model to analyze heterogeneous response to changes in fixed costs schedule flexibility and restrictions on weekly hours fixed costs of work affect response to each policy and determine associated losses

the medicaid notch labor supply and welfare participation evidence from eligibility expansions i assess the impact of losing public health insurance on labor market decisions of women by examining a series of medicaid eligibility expansions targeted toward young children these targeted expansions severed the historical tie between afdc and medicaid eligibility the reforms allowed a mother s earnings to increase without losing public health insurance for her young children increasing the income limit for medicaid resulted in a decrease in afdc participation and an increase in labor force participation among these women the effects were large for ever married women and negligible for never married women

does work pay in france monetary incentives hours constraints and the guaranteed minimum income abstract this paper uses a representative sample of individuals on france s main welfare program the revenu minimum d insertion or rmi to estimate monetary incentives for employment among welfare recipients based on the estimated joint distribution of wages and hours potentially offered to each individual we compute potential gains from working in a very detailed manner relating these gains to observed employment we then estimate a simple structural labor supply model we find that potential gains are almost always positive but very small on average especially for single mothers because of the high implicit marginal tax rates embedded in the system employment rates are sensitive to incentives with extensive margin elasticities for both men and women usually below one conditional on these elasticities simulations indicate that existing policies devoted to reducing marginal tax rates at the bottom of the income distribution such as the interessement earnings top up program have little impact in this population due to their very limited scope the negative income tax prime pour l emploi seems to be an exception

investigating recent trends in the u s teen birth rate we investigate trends in the u s rate of teen childbearing between 1981 and 2010 focusing specifically on the sizable decline since 1991 we focus on establishing the role of state level demographic changes economic conditions and targeted policies in driving recent aggregate trends we offer three main observations first the recent decline cannot be explained by the changing racial and ethnic composition of teens second the only targeted policies that have had a statistically discernible impact on aggregate teen birth rates are declining welfare benefits and expanded access to family planning services through medicaid but these policies can account for only 12 6 percent of the observed decline since 1991 third higher unemployment rates lead to lower teen birth rates and can account for 16 percent of the decline in teen birth rates since the great recession began

bounds on elasticities with optimization frictions a synthesis of micro and macro evidence on labor supply how can price elasticities be identified when agents face optimization frictions such as adjustment costs or inattention i derive bounds on structural price elasticities that are a function of the observed effect of a price change on demand the size of the price change and the degree of frictions the degree of frictions is measured by the utility losses agents tolerate to deviate from the frictionless optimum the bounds imply that frictions affect intensive margin elasticities much more than extensive margin elasticities i apply these bounds to the literature on labor supply the utility costs of ignoring the tax changes used to identify intensive margin labor supply elasticities are typically less than 1 of earnings as a result small frictions can explain the differences between micro and macro elasticities extensive and intensive margin elasticities and other disparate findings pooling estimates from existing studies i estimate a hicksian labor supply elasticity of 0 33 on the intensive margin and 0 25 on the extensive margin after accounting for frictions

evaluation of four tax reforms in the united states labor supply and welfare effects for single mothers an emerging consensus is that labor force participation is more responsive to taxes and transfers than hours worked to understand the implications of participation responses for the welfare analysis of tax reform this paper embeds this margin of labor supply in an explicit welfare theoretic framework we apply the framework to examine the welfare effects on single mothers in the united states following four tax acts passed in 1986 1990 1993 and 2001 we propose a simulation method combining features of fully structural microsimulation studies and simple deadweight loss calculations our approach accounts for the observed heterogeneity in the microdata but is simple to implement because we do not need to specify utility functions and estimate utility parameters we find that each of the four tax acts created substantial welfare gains and that the gains were concentrated almost exclusively on the participation margin our results imply that standard approaches not modeling the participation decision can make large errors

electricity prices large scale renewable integration and policy implications abstract this paper investigates the effects of intermittent solar and wind power generation on electricity price formation in germany we use daily data from 2010 to 2015 a period with profound modifications in the german electricity market the most notable being the rapid integration of photovoltaic and wind power sources as well as the phasing out of nuclear energy in the context of a garch in mean model we show that both solar and wind power granger cause electricity prices that solar power generation reduces the volatility of electricity prices by scaling down the use of peak load power plants and that wind power generation increases the volatility of electricity prices by challenging electricity market flexibility

family labor supply and the timing of cash transfers evidence from the earned income tax credit abstract this paper exploits the unique disbursement timing and benefit rules of the earned income tax credit eitc to provide new evidence on how families adjust their labor supply in response to receiving anticipated cash transfers i find that income seasonality caused by eitc receipt leads to changes in the intra year labor supply patterns of married women on average receiving a 1 000 payment significantly reduces the proportion of married women who work by 1 3 percentage points in the month when the eitc is received additionally this labor supply response is mainly driven by those who are secondary earners or liquidity constrained

decomposing trends in income volatility the wild ride at the top and bottom we use 2 year panels from the current population survey to provide a detailed accounting of family income volatility from 1980 to 2009 volatility doubled overall and the increase was most pronounced among the top 1 of the income distribution but in any given year the level of volatility among the bottom 10 exceeds that of the top the increased volatility comes from higher instability of head and spouse earnings other nonlabor income and from reduced covariance between these income sources with the tax system this suggests that current tax policy is less effective in mitigating income shocks than previous decades jel j31 i30

is smoking inferior evidence from variation in the earned income tax credit in this paper we estimate the causal income elasticity of smoking participation cessation and cigarette demand conditional upon participation using an instrumental variables iv estimation strategy we find that smoking appears to be a normal good among low income adults higher instrumented income is associated with an increase in the number of cigarettes consumed and a decrease in smoking cessation the magnitude and direction of the changes in the income coefficients from our ols to iv estimates are consistent with the hypothesis that correlational estimates between income and smoking related outcomes are biased by unobservable characteristics that differentiate higher income smokers from lower income smokers

canadian lone mother employment rates policy change and the us welfare reform literature the article examines the rise in canadian lone mother employment rates during the 1990s using data from the canadian labour force survey and methods borrowed from the united states welfare reform literature patterns of lone mother employment rate increases in canada are found to be similar to those in the united states income support policies in both countries changed in similar directions and in both cases increased the incentive to work despite these parallel changes it appears that unlike the united states policy reforms account for only a small part of the rise in canadian lone mother employment rates

the long term effects of childhood exposure to the earned income tax credit on health outcomes abstract the earned income tax credit eitc is a central component of the u s safety net benefiting about 25 million families using variation in the federal and state eitc this paper evaluates the long term impact of eitc exposure during childhood on the health of young adults we find that an additional 100 or a 3 increase in the average annual eitc exposure between birth and age 18 increases the likelihood of reporting very good or excellent health by 2 6 and decreases the likelihood of being obese by 4 1 between ages 22 and 27 the effects of eitc exposure are stronger for children raised in a single parent household and for children with lower educated parents

what has been learned about labor supply in the past twenty years the main advance in the study of labor supply in the past 20 years has come in recognizing and interpreting the variety of different labor supply functions that coexist in the empirical literature a crucial theoretical distinction with important empirical payoff is that between labor supply choices at the extensive margin i e labor force participation and employment choices and choices at the intensive margin i e choices about hours of work or weeks of work for workers another important distinction is the one between a descriptive labor supply function and a structural supply function that can be the basis for out of sample policy investigations concerning responses to tax and welfare programs and evaluations of welfare losses a full understanding of the participation hours dichotomy leads to an appreciation of the importance of the problem of selection bias what is the wage to impute to a nonworking person these distinctions are a legacy of the research conducted on labor supply over the past 20 years many important empirical questions have been addressed i how strong are the effects of taxes welfare and transfer programs on labor supply ii how important is intertemporal substitution can life cycle labor supply models explain business cycle labor supply behavior iii has the consensus view of the 1960 s of high labor supply elasticities for married women and low labor supply elasticities for married men held up all of the empirical evidence assembled on labor supply must be called into question in the light of important research on the basic quality of the data conducted by analysts at the university of michigan i discuss this evidence in a concluding section except for my discussion of measurement issues i focus only on the major discoveries about which a general consensus has emerged

how income transfer programs affect work savings and the income distribution a critical review for helpful comments on earlier drafts we thank without implicating moses abramovitz yves balcer john bishop alan blinder richard burkhauser michael darby irwin garfinkel alan gustman daniel hamermesh martin holmer george jakubson robert lampman paul menchik robert moffitt michael murray joseph quinn timothy smeeding eugene smolensky barbara wolfe and two anonymous referees

the optimal taxation of unskilled labor with job search and social assistance abstract in order to explore the optimal taxation of low skilled labor we extend the standard model of optimal nonlinear income taxation in the presence of quasi linear preferences in leisure by allowing for involuntary unemployment job search and an exogenous welfare benefit in trading off low skilled employment against work effort of higher skilled workers the government balances distortions on the search margin with those on work effort higher welfare benefits typically reduce taxes paid by low skilled workers and raise marginal tax rates throughout the skill distribution

quantifying the effect of renewable generation on day ahead electricity market prices the spanish case abstract the penetration of renewable generation has grown since the electricity sector has been deregulated to account for that this paper proposes a methodology to estimate the downward effect of renewable generation participation upon the day ahead electricity market prices since such an effect is quite intuitive observing the merit order of the generating units the european electricity market matching algorithm emma is currently based on euphemia price coupling of regions though there are several differences among countries across europe the new algorithm proposed uses market orders which include aggregate hourly orders such as aggregate supply and demand curves these orders are simple orders and the marginal price is affected by complex orders especially by the minimum income condition mic used in the iberian electricity market and considered in our proposed algorithm a case study of the spanish day ahead electricity market is evaluated for 2015 for which a daily generation sample is composed of 16 days in 2015 the sample is created following the characteristics of thermal production renewable production and inframarginal production the conclusions are drawn comparing the simulations of the real marginal prices and the new marginal prices after incorporating renewable generation participation into the aggregate demand curve at the maximum price

evaluating the impact of the french tax credit on the employment rate of women abstract this paper investigates the employment impact of a new tax credit programme that was put in place in france in 2001 according to the theoretical labour supply model tax credits will have a positive effect on individual labour market participation as they increase the rewards from work however tax credits may discourage married women s participation mainly due to income effects we analyse the introduction of the french measure by adopting a non experimental evaluation method various treatment and control groups are defined the first specification adopted relies on the policy eligibility rules for the construction of the control and treatment groups the others hinge respectively on marital status for women in couple households and on the presence of children for single women we find evidence of a negative employment effect for married women with a reduction of about three percentage points in the employment rate after the introduction of the policy in particular it seems to be the conditioning on total household resources that discourages married women s labour market participation on the contrary the employment impact of the measure is positive for cohabiting women and twice as large the policy effect is very small and statistically not significant for single women the net impact of the introduction of the tax credit on the total employment of women is very marginal amounting to the creation of about two thousand new jobs

a structural model of multiple welfare program participation and labor supply work on estimating the labor supply effects of high marginal tax rates in welfare programs has been hindered by the difficulty of estimating the effects of participation in multiple welfare programs simultaneously the authors solve this problem by applying methods of simulation estimation to a model of labor supply and multiple program participation the results show asymmetric wage and tax rate effects with fairly large wage elasticities of labor supply but very inelastic responses to moderate changes in cumulative marginal tax rates implying that high welfare tax rates do not necessarily induce major reductions in work effort copyright 1998 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

a matter of taste estimating import price inflation across u s income groups abstract we estimate import price inflation for different income deciles of u s consumers over the years 1998 through 2014 after structurally estimating the parameters of a model capturing non homotheticity across sectors we use price data from the universe of foreign establishments exporting goods to the u s as well as consumer expenditure information to construct import price indexes we find that lower income households experienced the most import price inflation while higher income households experienced the least over our time period

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

welfare the earned income tax credit and the labor supply of single mothers during 1984 1996 welfare and tax policy were changed to encourage work by single mothers the earned income tax credit was expanded welfare benets were cut welfare time limits were added and welfare cases were terminated medicaid for the working poor was expanded as were training programs and child care during this same time period there were unprecedented increases in the employment and hours of single mothers we show that a large share of the increase in work by single mothers can be attributed to the eitc and other tax changes with smaller shares for welfare benet cuts welfare waivers training programs and child care programs

the impact of electricity storage on wholesale electricity prices this paper analyzes the impact of electricity storage on the production cost of a power system and the marginal cost of electricity electricity price using a unit commitment model also real world data has been analyzed to verify the effect of storage operation on the electricity price using econometric techniques the unit commitment model found that the deployment of a storage system reduces the fuel cost of the power system but increases the average electricity price through its effect on the power system operation however the reduction in the production cost was found to be less than the increase in the consumer s cost of electricity resulting in a net increase in costs due to storage different storage and co2 price scenarios were investigated to study the sensitivity of these results the regression analysis supports the unit commitment results and finds that the presence of storage increases average wholesale electricity prices for the case study system

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 effects of time limits the eitc and other policy changes on welfare use work and income among female headed families of all of the welfare reforms that were implemented during the 1990s time limits may represent the single greatest break from past policy this paper expands on what is known about this important welfare reform measure by exploiting the predictions from grogger and michalopoulos 2003 to estimate the effects of time limits on welfare use employment labor supply earnings and income among female headed families results based on data from the march current population survey suggest that time limits have had important effects on welfare use and work accounting for about one eighth of the decline in welfare use and about 7 of the rise in employment since 1993 they have had no significant effect on earnings or income however the analysis also shows that the collective effects of other reforms have had important impacts on employment and labor supply furthermore it identifies the earned income tax credit eitc as a particularly important contributor to both the recent decrease in welfare use and t

retrospective modeling of the merit order effect on wholesale electricity prices from distributed photovoltaic generation in the australian national electricity market in electricity markets that use a merit order dispatch system generation capacity is ranked by the price that it is bid into the market demand is then met by dispatching electricity according to this rank from the lowest to the highest bid the last capacity dispatched sets the price received by all generation ensuring the lowest cost provision of electricity a consequence of this system is that significant deployments of low marginal cost electricity generators including renewables can reduce the spot price of electricity in australia this prospect has been recognized in concern expressed by some coalfired generators that delivering too much renewable generation would reduce wholesale electricity prices in this analysis we calculate the likely reduction of wholesale prices through this merit order effect on the australian national electricity market we calculate that for 5 gw of capacity comparable to the present per capita installation of photovoltaics in germany the reduction in wholesale prices would have been worth in excess of a 1 8 billion over 2009 and 2010 all other factors being equal we explore the implications of our findings for feed in tariff policies and find that they could deliver savings to consumers contrary to prevailing criticisms that they are a regressive form of taxation

the impact of family income on child achievement evidence from the earned income tax credit comment abstract in a recent article in the american economic review dahl and lochner 2012 use changes in the earned income tax credit to estimate the causal effect of family income on child achievement their instrumental variable iv estimates imply that a 1 000 increase in income raises combined math and reading test scores by about 6 percent of a standard deviation i document a variable coding error correcting this error reduces the iv estimates by 32 percent correcting this error does not change the qualitative conclusions of the study jel h24 h31 i21 i38 j13

the elasticity of taxable income with respect to marginal tax rates a critical review this paper critically surveys the large and growing literature estimating the elasticity of taxable income with respect to marginal tax rates using tax return data first we provide a theoretical framework showing under what assumptions this elasticity can be used as a sufficient statistic for efficiency and optimal tax analysis we discuss what other parameters should be estimated when the elasticity is not a sufficient statistic second we discuss conceptually the key issues that arise in the empirical estimation of the elasticity of taxable income using the example of the 1993 top individual income tax rate increase in the united states to illustrate those issues third we provide a critical discussion of selected empirical analyses of the elasticity of taxable income in light of the theoretical and empirical framework we laid out finally we discuss avenues for future research jel h24 h31 j22

welfare reform in european countries a microsimulation analysis this article compares the effects of increasing traditional welfare to introducing in work benefits in the 15 pre enlargement countries of the european union we use a labour supply model encompassing responses to taxes and transfers along both the intensive and extensive margins and the euromod microsimulation model to estimate current marginal and participation tax rates we quantify the equity efficiency trade off for a range of elasticity parameters in most countries because of large existing welfare programmes with high phase out rates increasing traditional welfare is undesirable unless the redistributive tastes of the government are extreme in contrast the in work benefit reform is desirable in a very wide set of cases

health insurance and the labor supply decisions of older workers evidence from a u s department of veterans affairs expansion this paper exploits a major mid 1990s expansion in the u s department of veterans affairs health care system to provide evidence on the labor market effects of expanding health insurance availability using data from the current population survey we employ a difference in differences strategy to compare the labor market behavior of older veterans and non veterans before and after the va health benefits expansion to test the impact of public health insurance on labor supply we find that older workers are significantly more likely to decrease work both on the extensive and intensive margins after receiving access to non employer based insurance workers with some college education or a college degree are more likely to transition into self employment a result consistent with job lock effects however less educated workers are more likely to leave self employment a result suggesting that the positive income effect from receiving public insurance dominates the job lock effect for these workers some relatively disadvantaged sub populations may also increase their labor supply after gaining greater access to public insurance consistent with complementary positive health effects of health care access or decreased work disincentives for these groups we conclude that this reform has affected employment and retirement decisions and suggest that future moves toward universal coverage or expansions of medicare are likely to have significant labor market effects

fertility and the personal exemption comment one of the most commonly cited studies on the effect of child subsidies on fertility whittington alm and peters 1990 claimed a large positive effect of child tax benefits on fertility using time series methods we revisit this question in light of recent increases in child tax benefits by replicating this earlier study and extending the analysis we do not find strong evidence to justify the model specification from the original paper moreover even if the original specification is appropriate we show that the results are not robust to more general measures of child tax benefits jel h24 j13

what causes public assistance caseloads to grow this paper uses state panel data to investigate changes in public assistance caseloads through the end of the afdc program in 1996 with particular attention to the rapid increase in caseloads between 1990 and 1994 previous research has focused on total caseloads with attention to economic and policy variables and does a relatively poor job of explaining this caseload increase this paper utilizes a much richer set of control variables to investigate the causes of caseload change it separates afdc caseloads into three subcomponent programs separately investigating changes within the afdc up program afdc child only cases and the remaining core afdc cases with benefits paid to single mothers and their children and it explores whether this caseload rise was driven by changes in takeup rates versus in eligibility the results indicate a large unexplained rise in total afdc caseloads even with a very rich specification a good share of this is due to sharp increases in child only cases driven by program and demographic shifts to a lesser extent this rise was caused by the expansion of afdc up to all states these two factors explain half of the overall rise and all of the unexplained rise in afdc caseloads the remaining increase in core afdc cases benefits received by single mothers and their children is well explained within the model and is the result of economic demographic political and policy changes these variables appear to have increased eligibility among the core afdc population in the early 1990s during the economic slowdown takeup rates also increased during this time period but not by a large amount

optimal income transfer programs intensive versus extensive labor supply responses this paper analyzes optimal income transfers for low incomes labor supply responses are modeled along the intensive margin intensity of work on the job and along the extensive margin participation into the labor force when behavioral responses are concentrated along the intensive margin the optimal transfer program is a classical negative income tax program with a substantial guaranteed income support and a large phasing out tax rate however when behavioral responses are concentrated along the extensive margin the optimal transfer program is similar to the earned income tax credit with negative marginal tax rates at low income levels and a small guaranteed income carefully calibrated numerical simulations are provided

the merit order effect in the italian power market the impact of solar and wind generation on national wholesale electricity prices abstract italy promoted one of the most generous renewable support schemes worldwide which resulted in a high increase of solar power generation we analyze the italian day ahead wholesale electricity market finding empirical evidence of the merit order effect over the period 2005 2013 an increase of 1 gwh in the hourly average of daily production from solar and wind sources has on average reduced wholesale electricity prices by respectively 2 3 mwh and 4 2 mwh and has amplified their volatility the impact on prices has decreased over time in correspondence with the increase in solar and wind electricity production we estimate that over the period 2009 2013 solar production has generated higher monetary savings than wind production mainly because the former is more prominent than the latter however in the solar case monetary savings are not sufficient to compensate the cost of the related supporting schemes which are entirely internalized within end user tariffs causing a reduction of the consumer surplus while the opposite occurs in the case of wind

the merit order effect a detailed analysis of the price effect of renewable electricity generation on spot market prices in germany the german feed in support of electricity generation from renewable energy sources has led to high growth rates of the supported technologies critics state that the costs for consumers are too high an important aspect to be considered in the discussion is the price effect created by renewable electricity generation this paper seeks to analyse the impact of privileged renewable electricity generation on the electricity market in germany the central aspect to be analysed is the impact of renewable electricity generation on spot market prices the results generated by an agent based simulation platform indicate that the financial volume of the price reduction is considerable in the short run this gives rise to a distributional effect which creates savings for the demand side by reducing generator profits in the case of the year 2006 the volume of the merit order effect exceeds the volume of the net support payments for renewable electricity generation which have to be paid by consumers

taxes and time allocation evidence from single women and men the classic model of becker 1965 suggests that labor supply decisions should be analyzed within the broader context of time allocation and market good consumption choices but most empirical work on policy has focused exclusively on measuring impacts on market work this paper examines how income taxes affect time allocation during the entire day and how these time allocation decisions interact with expenditure patterns using the panel study of income dynamics from 1975 to 2004 we analyze the response of single women s housework labor supply and other time to variation in tax and transfer schedules across income levels number of children states and time we find that when the economic reward to participating in the labor force increases market work increases and housework decreases with the decrease in housework accounting for approximately two thirds of the increase in market work analysis of repeated cross sections of time diary data from 1975 to 2004 shows that home production decreases substantially when market hours of work increase in response to policy changes data on expenditures from the consumer expenditure survey from 1980 to 2003 show some evidence that expenditures on market goods likely to substitute for housework increase in response to a greater incentive to join the labor force the baseline estimates imply that the elasticity of substitution between consumption of home and market goods is 2 61 the results are consistent with the becker model meanwhile single men show little response to changes in tax policy and we are able to rule out an elasticity of substitution between home and market goods for this group of more than 1 52

solar feed in tariffs and the merit order effect a study of the german electricity market abstract this study investigates the merit order effect moe of the recent years implementation of solar power in germany market clearing electricity prices and production levels are compared for the years 2009 2011 and a model for the relationship between the electricity price and price sensitive electricity production is developed and applied to predict electricity prices in germany from july 2010 to july 2011 with and without solar electricity generation seg the results show that the seg has caused a 7 reduction in average electricity prices for this period the average daily maximum price and daily price variation are also found to decrease by 13 and 23 respectively when taking the moe into account the net consumer s cost of the solar feed in tariff fit system is found to be 23 less than the charge listed in the electricity bill the german fit policy for solar power has been subject to considerable public debate and a common argument brought up in disfavor of the system is the high cost for the consumers in this study we demonstrate the importance of including the moe when evaluating the total costs and benefits of the fit policy mechanism

linkages among welfare food assistance programmes and labour supply evidence from the survey of programme dynamics at the centre of the debate on welfare reform is whether incentives based systems help poor families move out of poverty into jobs recent data from the first survey of programme dynamics longitudinal and the 1998 experimental data files allow evaluation of the interaction among the food stamp programme fsp temporary assistance for needy families tanf programme and labour force participation under different programme design and economic conditions a model that incorporates jointly determined programmes participation and work decisions is applied to a sample of working age lower income and asset households participation in tanf increases the probability of fsp participation and decreases the probability of being in the work force working decreases the probability of receiving food stamps work tanf and fsp participation are related and tanf and fsp participation rates among poor households who are potentially eligible for tanf are sensitive to changes in programme parameters as expected labou

the impact of renewable energies on eex day ahead electricity prices in this paper we analyze the impact of renewable energies wind and photovoltaic on the formation of day ahead electricity prices at eex we give an overview of the policy decisions concerning the promotion of renewable energy sources in germany and discuss their consequences on day ahead prices an analysis of electricity spot prices reveals that the introduction of renewable energies enhances extreme price changes in the frame of a dynamic fundamental model we show that there has been a continuous electricity price adaption process to market fundamentals furthermore the fundamental drivers of prices differ among hours with different load profiles our results imply that renewable energies decrease market spot prices and have implications on the traditional fuel mix for electricity production however the prices for the final consumers increased overall because they must pay in addition the feed in tariffs for the promotion of renewable energy

the market value of variable renewables the effect of solar wind power variability on their relative price this paper provides a comprehensive discussion of the market value of variable renewable energy vre the inherent variability of wind speeds and solar radiation affects the price that vre generators receive on the market market value during windy and sunny times the additional electricity supply reduces the prices because the drop is larger with more installed capacity the market value of vre falls with higher penetration rate this study aims to develop a better understanding on how the market value with penetration and how policies and prices affect the market value quantitative evidence is derived from a review of published studies regression analysis of market data and the calibrated model of the european electricity market emma we find the value of wind power to fall from 110 of the average power price to 50 80 as wind penetration increases from zero to 30 of total electricity consumption for solar power similarly low value levels are reached already at 15 penetration hence competitive large scale renewable deployment will be more difficult to accomplish than as many anticipate

an ex post analysis of the effect of renewables and cogeneration on spanish electricity prices abstract growing concerns about climate change and energy dependence are driving specific policies to support renewable or more efficient energy sources such as cogeneration in many regions particularly in the production of electricity these policies have a non negligible cost and therefore a careful assessment of their impacts seems necessary in particular one of the most debated impacts is their effect on electricity prices for which there have been some ex ante studies but few ex post studies this article presents a full ex post empirical analysis by looking at use of technologies and hourly electricity prices for 2005 2009 in spain to study the effects that the introduction of renewable electricity and cogeneration has had on wholesale electricity prices it is particularly interesting to perform this study in spain where an active system of public support to renewables and cogeneration has led to a considerable expansion of these energy sources and electricity pricing is at the center of intense debate the paper reports that a marginal increase of 1 gwh of electricity production using renewables and cogeneration is associated with a reduction of almost 2 per mwh in electricity prices around 4 of the average price for the analyzed period

estimates of effective guarantees and tax rates in the afdc program for the post obra period we employ the model used by fraker moffitt and wolf 1985 to estimate effective tax rates and guarantees in the aid to families with dependent children afdc program for the years 1967 82 to produce comparable estimates for 1983 91 we compare this method of benefit prediction with other methods in the literature and clarify the interpretation of estimates generated using the fraker moffitt and wolf model we use our estimates for the period from 1983 to 1991 to examine how effective afdc tax rates and guarantee levels have changed over time and relative to nominal or official program parameters

the socioeconomic consequences of in work benefit reform for british lone mothers in october 1999 the british government enacted the working families tax credit which aimed at encouraging work among low income families with children this paper uses panel data collected between 1991 and 2001 to evaluate the effect of this reform on single mothers we find that the reform led to a substantial increase in their employment rate of about five percentage points which was driven by both a higher rate at which lone mothers remained in the labor force and a higher rate at which they entered it women s responses were highly heterogeneous with effects double this size for mothers with one preschool aged child and virtually no effect for mothers with multiple older children the employment increase was accompanied by significant increases in paid childcare utilization and our analysis in fact suggests that the generous childcare credit component of the reform played a key role in explaining the estimated employment and childcare usage responses we also find that the increase in labor market participation was accompanied by reductions in single mothers subsequent fertility and in the rate at which they married behavioral responses which in turn are likely to influence the reform s overall impact on child poverty and welfare

do in work tax credits serve as a safety net we test the eitc s response to economic need using irs data we exploit differences in timing and severity of economic cycles across states because the eitc requires earned income there is a theoretical ambiguity in the credit s cyclicality we find higher unemployment leads to increased likelihood of eitc recipiency and in credit amounts received for married couples but has insignificant effects for single individuals the eitc s protective effects are concentrated among skilled workers the eitc mitigates income shocks for married couples with children and groups likely to have moderate earnings but does not for most recipients single parents with children

effects of prenatal poverty on infant health state earned income tax credits and birth weight this study estimates the effects of prenatal poverty on birth weight using changes in state earned income tax credits eitc as a natural experiment we seek to answer two questions about poverty and child wellbeing first are there associations between prenatal poverty and lower birth weights even after factoring out unmeasured potential confounders because birth weight predicts a range of outcomes across the life course lower birth weights that result from poverty may have lasting consequences for children s life chances second how have recent expansions of a work based welfare program i e the eitc affected maternal and infant health in recent decades u s poverty relief has become increasingly tied to earnings and labor markets but the consequences for children s wellbeing remain controversial we find that state eitcs increase birth weights and reduce maternal smoking however results related to afdc tanf and varying eitc effects across maternal ages raise cautionary messages

modeling the impact of a wind power producer as a price maker wind energy is present in many countries throughout the world the main types of wind sales in electricity markets are via regulated tariffs or pool based markets production companies choose cost effective options for selling wind energy and some markets like the irish electricity market use regulated tariffs to remunerate wind production this paper aims to provide some answers to explain what effect wind offers may have in an electricity market if wind power producers participated in the day ahead market without receiving any premium or aid a price maker optimization model is used to detect its effect on prices the model encompasses energy offers by other technologies using residual demand curves and detailed modeling of wind imbalances it is observed that wind acting as price maker reduces electricity prices and the imbalance penalties help the system operator to reduce imbalances a realistic case study using data from the irish electricity market illustrates the methodology used comparing the effect of imbalance penalties in the models in terms of profit and total imbalance of the system

migration the life cycle and state benefits how low is the bottom i show that among women likely to use welfare movers move to higher benefit states i also find that the probability likely welfare users will move at all is lower in higher benefit states this effect is concentrated early in the life cycle as theory predicts i construct a theoretical framework to measure the impact of welfare migration on optimal state benefits simulation results suggest little impact in higher benefit states but possibly a more substantial impact in other states finally evidence suggests little reason for concern due to welfare migration in using cross state variation in welfare generosity to identify incentive effects of the welfare system on other outcome variables

the impact of renewables on electricity prices in germany an estimation based on historic spot prices in the years 2011 2013 abstract germany s public opinion and media usually attribute increasing electricity prices to the high share of renewables in the german power system but average electricity prices at the european energy exchange dropped during the last years due to an excess of renewable energy this study uses historic market data in order to quantify the effect of renewables on prices historic demand and supply curves from 2011 to 2013 have been used to reconstruct electricity prices under the assumption that no wind and pv would be available the analysis reveals an astonishingly high increase of market prices up to 5 29 ct kwh due to a lack of non renewable power capacities in 2013 the available conventional capacity would not have been able to cover the demand during 269 hours the estimated maximum deficit of 5 6 gw is in good agreement to data published by the german grid operators the discussion of the origin of this deficit leads to the conclusion that the current situation has not been caused by renewables the liberalization of the european energy market established investment risks that hindered required investment a long time before the renewables boomed

does renewable energy generation decrease the volatility of electricity prices an analysis of denmark and germany although variable renewable energy vre technologies with zero marginal costs decrease electricity prices the literature is inconclusive about how the resulting shift in the supply curves impacts price volatility because the flexibility to respond to high peak and low off peak prices is crucial for demand response applications and may compensate for the losses of conventional generators caused by lower average prices there is a need to understand how the penetration of vre affects volatility in this paper we build distributed lag models with danish and german data to estimate the impact of vre generation on electricity price volatility we find that in denmark wind power decreases the daily volatility of prices by flattening the hourly price profile but in germany it increases the volatility because it has a stronger impact on off peak prices our analysis suggests that access to flexible generation capacity and wind power generation patterns contribute to these differing impacts meanwhile solar power decreases price volatility in germany by contrast the weekly volatility of prices increases in both areas due to the intermittency of vre thus policy measures for facilitating the integration of vre should be tailored to such region specific patterns

estimating taxable income responses with elasticity heterogeneity abstract we explore elasticity heterogeneity in the estimation of the elasticity of taxable income eti and propose potentially valid instruments we show that previously used instruments are not valid and yield weighted averages of etis of different taxpayers plus a bias using the nber tax panel for 1979 1990 we find a weighted average eti of 0 57 when using all available variation in budget set changes provided by the tax reforms in the data our results also demonstrate that elasticity heterogeneity is an important explanation for the remarkable divergence of estimates in the previous literature

effective tax rates and guarantees in the afdc program 1967 1982 estimates of effective tax rates on earned and unearned income and estimates of effective guarantees in the afdc program by state are provided for the period 1967 1982 the results indicate that effective real guarantees fell every year from 1967 to 1981 but stabilized in 1982 effective tax rates on unearned income rose steadily from 1967 to 1981 and took a particularly large additional jump in 1982 effective tax rates on earned income fell after 1967 but then gradually rose throughout the 1970s until 1982 when they took a much larger jump thus guarantees fell and tax rates rose over the 1970s as tight budgets forced states to restrict benefits and in the early 1980s tax rates were pushed even higher by federal legislation

the integration of child tax credits and welfare evidence from the national child benefit program abstract in 1998 the canadian government introduced a new child tax credit the innovation in the program was its integration with social assistance welfare some provinces agreed to subtract the new federally paid benefits from provincially paid social assistance partially lowering the welfare wall other provinces did not integrate benefits providing a quasi experimental framework for estimation we find large changes in social assistance take up and employment in provinces that provided the labour market incentives to do so in our sample the integration of benefits can account for between 19 and 27 of the decline in social assistance receipt between 1997 and 2000

minimum wages and poverty will a 9 50 federal minimum wage really help the working poor using data drawn from the march current population survey we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates when we then simulate the effects of a proposed federal minimum wage increase from 7 25 to 9 50 per hour we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from 5 15 to 7 25 per hour assuming no negative employment effects only 11 3 of workers who will gain live in poor households compared to 15 8 from the last increase when we allow for negative employment effects we find that the working poor face a disproportionate share of the job losses our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor

technology trade and factor prices abstract the view that recent changes in the distribution of income primarily reflect technology rather than trade may be the majority opinion but has been harshly criticized by some trade economists this paper will argue that the critique in fact misses the point essentially because the critics undertake the wrong thought experiments trade volumes are not irrelevant if one poses the question correctly one immediately realizes that small trade volumes are inconsistent with a story that attributes large distributional effects to trade the factor bias of technological change is not immaterial except in the case where such change takes place in a small open economy as opposed to one that can affect world prices and where technical change occurs only in that economy rather than occurring simultaneously in other economies as well since the real situation does not meet either criterion factor bias definitely does matter most surprisingly the much maligned use of a factor content approach to infer the effects of trade on factor prices turns out to be an entirely justified procedure when carefully applied

the elasticity of taxable income evidence and implications abstract a central tax policy parameter that has recently received much attention but about which there is substantial uncertainty is the overall elasticity of taxable income we provide new estimates of this elasticity which address identification problems with previous work by exploiting a long panel of tax returns to study a series of tax reforms throughout the 1980s this identification strategy also allows us to provide new evidence on both the income effects of tax changes on taxable income and on variation in the elasticity of taxable income by income group we find that the overall elasticity of taxable income is approximately 0 4 the elasticity of real income not including tax preferences is much lower we estimate small income effects of tax changes on reported income implying that the compensated and uncompensated elasticities of taxable income are very similar we estimate that this overall elasticity is primarily due to a very elastic response of taxable income for taxpayers who have incomes above 100 000 per year who have an elasticity of 0 57 while for those with incomes below 100 000 per year the elasticity is less than one third as large moreover high income taxpayers who itemize are particularly responsive to taxation our estimates suggest that optimal tax structures may feature tightly targeted transfers to lower income taxpayers and a flat or even declining marginal rate structure for middle and high income taxpayers

do welfare asset limits affect household saving evidence from welfare reform we use data from the panel study of income dynamics to estimate the effect of new saving incentives implemented as part of the 1996 welfare reform on household saving economic theory predicts that loosening asset limits will increase total savings for households with a large ex ante probability of welfare receipt such as female headed households with children we follow a sample of female heads with children and find that in both absolute terms and relative to comparison groups of male heads and female heads without children there has been no effect of welfare policy changes on the saving of at risk households

when do women use aid to families with dependent children and food stamps the dynamics of eligibility versus participation this paper investigates dynamic patterns in the relationship between eligibility and participation in the aid to families with dependent children afdc and food stamp programs using monthly longitudinal data from the survey of income and program participation the results indicate that there are many relatively short eligibility spells that do not result in program participation and end with increases in income participation is most likely to occur among women with lower current and future earnings opportunities and is affected by locational and policy parameters those who elect to participate in these programs tend to start receiving benefits almost immediately upon becoming eligible a substantial number of women exit these programs before their eligibility ends among at least some of these women it is likely that unreported changes in income are occurring in 1989 if all eligible single parent families had participated in afdc and food stamps benefit payments in these programs would have been 13 5 billion higher

the merit order effect of wind and photovoltaic electricity generation in germany 2008 2016 estimation and distributional implications abstract generation from renewable energy sources in germany has experienced a considerable uptake in recent years mainly responsible for this development is the german renewable energy sources act erneuerbare energien gesetz eeg this paper considers redistributive implications of the eeg for different electricity consumers using time series regression analysis we show that electricity generation by wind and pv has reduced spot market prices considerably by 6 mwh in 2010 rising to 10 mwh in 2012 we use these results to build a near term forecasting tool for merit order effects projected to reach 14 16 mwh in 2016 on the other hand the costs of the eeg are passed forward to consumers in the form of a surcharge our findings highlight significant redistributive transfers under the current design of the eeg in particular some energy intensive industries are benefiting from lower wholesale electricity prices whilst being largely exempted from contributing to the costs of the scheme we also highlight implications of our results for other areas for reform of the eeg such as adequate remuneration mechanisms that ensure efficient operation and investment decisions are made under the scheme more generally these findings suggest that policy makers need to integrate distributional assessments into policy design and implementation