Government subsidies have a measurable impact on labor supply.
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refutedsupported
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Peer-reviewed economic studies confirm that various forms of government subsidies, welfare reforms, and financial incentives exert measurable effects on household labor supply and labor market participation.
The 1996 US welfare reform introduced limits on years of welfare receipt. We show that this reduced program participation, raised employment for single mothers, and reduced divorce. A limited commitment, lifecycle model of labor supply, marriage and divorce, estimated on pre-reform data, replicates these effects. A large part of the responses occur in anticipation of benefit exhaustion, impacting primarily women with low potential earnings. The reform reduces lifetime utility of women, even allowing for the government savings, but has negligible effects on men. The expectation of marriage attenuates the losses for women and an increased probability of single-motherhood raises them.
This research evaluates the impact on German household labor supply of various subsidyschemes proposed to foster low-wage employment. Using data from the German Socio-Economic Panel, we estimate a discrete choice model of household labor supply. On thebasis of the estimated labor supply parameters of husbands and wives, we simulateparticipation and hours effects of different policies raising low labor earnings at the individualand household levels. In all cases, the labor supply effect is very moderate. Subsidies toindividuals promote part-time employment, in particular of second earners, while subsidiesbased on low household income drive the better qualified partner out of the labor market sothat the total number of labor market participants even declines.
Abstract We study whether Honduran municipalities exposed to a conditional cash transfer program from 2000 to 2005 experience lasting effects on human capital and labor market outcomes. The government randomly assigned three forms of delivering program benefits across targeted municipalities: demand (vouchers), supply (clinic and school subsidies), and a combination of both. This program provides an opportunity to explore if and how differential exposure to incentives produces longer term effects. Using municipal-level panel data, these effects are estimated using difference-in-differences. We find that the form of delivering cash transfers influences the degree to which these programs make progress towards their objective of reducing future poverty. Compared to municipalities receiving support from the Honduran Poverty Reduction Strategy, our study indicates that exposure to demand-side incentives individually has no lasting impact. However, joint exposure to both demand- and supply-side incentives does lead to measurable improvements in schooling and labor market participation.
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