"Making work pay" in a rationed labor market

• Published in: Journal of population economics Vol. 23; no. 1; pp. 323 - 351
• Main Authors: Bargain, Olivier, Caliendo, Marco, Haan, Peter, Orsini, Kristian
• Format: Journal Article
• Language: English
• Published: Berlin/Heidelberg Springer 01-01-2010; Springer-Verlag; Springer Nature B.V
• Subjects: Bias; Demography; Earnings; Economic theory; Economics; Economics and Finance; Employment; Employment policy; Germany; Households; Income taxes; LABOR; Labor Economics; Labor market; Labor markets; Labor supply; Labour demand; Labour economics; Labour force; Labour force utilization; Labour market; Labour market participation; Labour market structure; Labour supply; Men; Original Paper; Population Economics; Rationing; Recreation; Reforms; Single status; Social Policy; Studies; Tax credits; Tax reform; Tax systems; Taxation; U.S.A; Unemployed; Unemployment; United Kingdom; United Kingdom > UK; United States > US; C52; Involuntary unemployment; J22; Tax-benefit systems; Household labor supply; H31
• ISSN: 0933-1433; 1432-1475
• DOI: 10.1007/s00148-008-0220-9

This paper empirically analyzes the labor supply effects of two "making work pay" reforms in Germany. We provide evidence in favor of policies that distinguish between low effort and low productivity by targeting individuals with low wages rather than those with low earnings. We discuss our results more generally and with comparisons to the family-based tax credits in force in the US and the UK. For the evaluation of the policies, we apply a static structural labor supply framework and explicitly account for demandside constraints by using a double-hurdle model.