Effects of health insurance on labour supply: evidence from the health care fund for the poor in Vietnam

The expansion of health insurance in emerging countries raises concerns about the unintended negative effects of health insurance on labour supply. This article examines the labour supply effects of the Health Care Fund for the Poor (HCFP) in Vietnam in terms of the number of work hours per month and labour force participation (the probability of employment). Employing various matching methods combined with a Difference-in-Differences approach on the Vietnam Household Living Standard Surveys 2002–2006, we show that the HCFP, which aims to provide poor people and disadvantaged minority groups with free health insurance, has a negative effect on labour supply. This is manifested in both the average number of hours worked per month and the probability of employment, suggesting the income effect of the HCFP. Interestingly, the effects are mainly driven by the non-poor recipients living in rural areas, raising the question of the targeting strategy of the programme.     

Housing Subsidies and Work Incentives in Great Britain

The relationship between housing costs, wages and transfer programmes is complex yet helps determine the incentive to work for individuals in low income or high housing cost households. We estimate a static discrete choice labour supply model that allows for housing benefit programme participation, using samples of married women and unmarried women drawn from Great Britain Family Resources Surveys 1994/5–97/8. We find women are quite responsive to labour supply incentives and that housing benefit income has similar incentive effects to earned income which suggests any 'stigma' is small. Our analysis is complemented by simulating housing benefit and direct rent subsidy reforms.     

A Reappraisal of the Virtues of Private Sector Employment Programmes*

This paper evaluates the employment effects of active labour market programmes for Danish welfare benefit recipients, focusing on private sector employment (PSE) programmes. Using a latent variable model that allows for heterogeneous treatment effects among observationally identical persons, we estimate commonly defined mean treatment effects and the distribution of treatment effects. We find no significant mean treatment effect of PSE programme participation as compared to participation in other programmes for PSE programme participants. However, we find substantial heterogeneity in the treatment effects, and those most likely to participate in PSE programmes are those who benefit the least from such programmes.     

The Earned Income Tax Credit: Targeting the poor but crowding out wealth

This paper quantifies the individual, aggregate and welfare effects of the US Earned Income Tax Credit (EITC). In particular, we analyze the labour supply and saving responses to changes in tax credit generosity and their implications for prices and welfare. Our results show that the EITC is a subsidy on labour income and a tax on savings. An increase in EITC generosity raises labour force participation, reduces savings for many and provides insurance to working poor households. The EITC reduces earnings inequality but increases the skill premium and wealth inequality. A 10% increase in tax credit generosity increases welfare by 0.31% and benefits the majority of the population.     

A net impact analysis of active labour programmes in Hungary

This paper presents estimates of the impact on re-employment and earnings of the two most popular active labour programmes used during the economic transition in Hungary: retraining and public service employment (PSE). To adjust for non-random assignment of programme participants, net impacts were computed using matched pair samples and regression models. The evidence suggests retraining may improve the chance for reemployment, is unlikely to improve re-employment earnings, but may improve job durability. Net societal benefits could be improved by retraining relatively more males, older persons, and those with less education. PSE does not appear to provide a reliable path to a regular non-subsidized job, and may even lower re-employment earnings. PSE might best be viewed as an income transfer programme having the collateral benefit of maintaining basic work habits. The net societal impact of PSE could increase if it involved relatively more females and older persons.     

Economic Effects of Workfare Reforms for Single Mothers: Benefit Substitution and Labour Supply Responses*

We analyse the economic effects of nationwide Norwegian reforms on the state benefit programme targeting single mothers. Our results show that for each reduction of 100 Norwegian kroner (NOK) in benefit payments from the programme, single mothers replaced 65 NOK through benefit substitution. Their labour supply and disposable income also increased in the short term. However, the reforms doubled the poverty rate among single mothers in the long term. The reforms led to a total net gain to public expenditure of 3.6 billion NOK (449 million euros) during the 1998–2008 period, corresponding to a 14 percent decrease in total benefit payments to single mothers.     

Gender roles,labour market participation and household income position

In empirical research on labour supply behaviour, variables like age, education or the household's financial situation as well as economic and demographic characteristics, social attitudes and gender role schemes are believed to influence the annual working hours. This paper starts from the assumption that these determinants work differently according to the poverty level of the household in which the individual lives. Using data from the German Socio-Economic Panel (GSOEP), the paper empirically tests this hypothesis for women and men living in households with a disposable income above the poverty line and of those living in poor households. The results of multiple regression analysis show traditional gender role patterns in labour supply decisions, but only for persons in households with an income above the poverty line.     

Measuring the benefits of local publilc goods: environmental quality in Gaston County,North Carolina

Local governments across the United states have been confronted with a growing range of federal and state-mandated environmental protection programmes. It is found that an application of contingent valuation to a local environmental policy is internally valid by theoretically and empirically examining the economic determinants of responses to a hypothetical referendum. The resulting option price estimate is statistically reliable and has a reasonable order of magnitude. Results indicate that respondents are willing to pay for improvements in water quality,but not air qualilty. It is found that informatiion from various external sources helps to explain risk perceptions, and these perceptions, in turn influence willingness to pay. The aggregate benefits of an air and water polllution control programme to Gaston County are estimated to be $13.07 million annually with a 90% confidence interval of $11.07 million and $16.12 million.     

Reduction of child poverty in Serbia: Benefit or employment strategy?

Based on the Serbian Survey of Income and Living Conditions (SILC) and tax benefits and structural microsimulation models, we evaluate the labour supply and distributive effects of several reform strategies concerning two major social transfers in Serbia: child allowance and social monetary assistance. Our results show that, in a context of a low labour participation rate, and high unemployment and informality rates, a benefit strategy is by far the more cost‐effective option for reducing child poverty than an employment strategy that aims to raise the work incentives for parents. Both proposed reforms are found to be progressive.     

GASOLINE PRICES,GOVERNMENT SUPPORT,AND THE DEMAND FOR HYBRID VEHICLES IN THE UNITED STATES*

We analyze the determinants of hybrid vehicle demand, focusing on gasoline prices and income tax incentives. We find that hybrid vehicle sales in 2006 would have been 37% lower had gasoline prices stayed at the 1999 levels, and the effect of the federal income tax credit program is estimated at 20% in 2006. Under the program, the cost of reducing gasoline consumption was $75 per barrel in government revenue and that of CO₂ emission reduction was $177 per ton. We show that the cost effectiveness of federal tax programs can be improved by a flat rebate scheme.     

Wage subsidies, work incentives, and the reform of the Austrian welfare system

We analyze the employment and income effects of a needs-based minimum benefit system (“Bedarfsorientierte Mindestsicherung”) which has recently been introduced in Austria. The aim of this reform was to reduce poverty as well as to increase work incentives for recipients of social assistance. On the basis of a behavioral microsimulation model we show that this new system slightly increases employment but reduces incomes for the poorest households remaining unemployed. As an alternative, we analyze a budgetary neutral reform proposal which reduces financial incentives for marginal employment and provides a wage subsidy rewarding working longer hours. This alternative reform would yield larger positive employment effects, but more households would suffer from income losses. Overall, income inequality and poverty are affected little, however, both under the new social welfare system and the alternative reform proposal.     

The Redistributive Effects of a Minimum Wage Increase in New Zealand: A Microsimulation Analysis

This paper examines the potential effects on inequality and poverty of a minimum wage increase, based on a microsimulation model that captures the details of household composition and the income tax and welfare benefit system and allows for labour supply responses. Results suggest that, largely due to the composition of household incomes, a policy of increasing the minimum wage has a relatively small effect on the inequality of income per adult equivalent person, and a money metric utility measure, using several inequality indices. Hence, the minimum wage policy does not appear to be particularly well targeted, largely due to many low wage earners being secondary earners in higher income households, while many low income households have no wage earners at all. These results are reinforced when allowing for wage spillovers further up the wage distribution. Nevertheless, a minimum wage increase can have a more substantial effect on some poverty measures for sole parents in employment.     

Workforce or workfare? The optimal use of work requirements when labour is supplied along the extensive margin

This paper explores the use of workfare as part of a tax mix when labour supply responses are along the extensive margin. In an economy where the government has a priori chosen any tax‐and‐benefit schedule, we show that, despite their common goal of providing additional incentives for individuals to enter the labour force, workfare and an earned income tax credit are at odds with each other. We also show that, in the presence of an optimal nonlinear income tax, introducing unproductive workfare is always suboptimal when individuals face the same disutility of being on workfare. When this disutility is heterogeneous, unproductive workfare may be a useful policy tool.     

The effect of universal child benefits on labour supply

Using a difference‐in‐differences estimator, I find the Canadian Universal Child Care Benefit has significant negative income effects on the labour supply of married individuals. The likelihood of lower‐educated mothers to participate in the labour force is reduced 3.2 percentage points when receiving the benefit. Median hours worked per week among lower‐educated mothers is reduced by 1.9 hours. The effects on higher‐educated mothers are substantial, with median hours worked among higher‐educated mothers reduced by nearly one hour per week. For men, the evidence suggests small but significant income effects on labour supply, consistent with the literature on labour supply elasticities.     

What drives inequality and poverty in the EU? Exploring the impact of macroeconomic and institutional factors

Employing panel data techniques, we investigate the macroeconomic and institutional determinants of inequality and poverty in the EU over the period 1994–2008. We pay particular attention to the effects of macroeconomic environment, social protection and labour market institutions. The empirical analysis shows that the social transfers in cash, and principally the transfers that do not include pensions, exert a prominent impact on inequality and poverty. Also significant is the effect of the GDP per capita. The impact of employment on inequality and poverty is not empirically sound. The same holds for the labour market institutions; an exception is the union density, which appears conducive to a less dispersed personal income distribution. Importantly, the results support the view that the social protection system acts as a catalyst in determining the effectiveness of social spending and the distributive role of economic growth and employment.     

Taxation and labour supply: Evidence from a representative population survey

We study how taxation influences labour supply using a specifically designed representative survey of the German population. First, we investigate whether taxes generally matter for the labour supply decisions of our respondents. Around 41 per cent report taking taxes into consideration, implying that the majority of the German population is unresponsive to taxation. Second, we look at self-reported labour supply adjustments following a recently enacted payroll tax change. Only around 12 per cent of our respondents report an actual labour supply response, but we find evidence of an income, as well as a substitution, effect of the tax change. Our conclusion is that the effects of taxes on labour supply in Germany are likely small. We analyse the correlation with economic and socio-demographic variables and find that the self-employed are relatively more sensitive to taxation and that low interest rates reduce incentives for expanding the labour supply.     

Employment security and the demand for labour in Europe

This paper analyses the impact of employment security on labour demand. The approach taken is to estimate a dynamic labour demand function that allows for the effect of changes in a measure of employment security derived from surveys of employers. The estimation uses panel data on employment (both in terms of the total number of employees and total hours worked) for seven European countries for the period 1981–1994. The results suggest that employment security can have significant effects in slowing down the dynamic adjustment of labour demand. The paper also finds some (less robust) evidence that employment security can increase the long run level of labour demand in terms of total hours, but not the number of persons employed.     

THE REDISTRIBUTIVE IMPACT OF ALTERNATIVE INCOME MAINTENANCE SCHEMES: A MICROSIMULATION STUDY USING SWISS DATA

Taking a benchmark scenario, the current situation in Switzerland, and using a microsimulation technique, we compare the effectiveness of various income maintenance schemes for reducing inequality and poverty. A full negative income tax allowance designed to eliminate poverty is shown to reduce income inequality most drastically. An integrated federal linear tax rate of 62 percent is required to make it viable. Aggregate work hours are reduced by approximately 10 percent and average disposable income falls by 9.3 percent under such circumstances. A participation income restricted to adults in employment and covering 50 percent of subsistence costs is however shown to result in an unambiguous social welfare improvement over the current situation in Switzerland.     

Does medicaid generosity affect household income?

Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)-induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states and are potentially subject to biases due to policy endogeneity. Using a Regression Kink Design (RKD) framework, this paper takes a new approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from 1980 to 2013 suggest that generous federal funding of state-level Medicaid costs have a negative effect on household income. The negative impact of Medicaid generosity on household income is more pronounced at the lower end of the household income distribution and on the income and earnings of female heads.     

REGIONAL UNEMPLOYMENT DISPARITIES: AN EVALUATION OF POLICY MEASURES*

This paper analyses the efficacy of regional and federal government policies in reducing inter‐regional unemployment disparities. We use as our framework a two‐region general equilibrium model with a given freely‐mobile supply of labour. We assume inter‐regional migration to occur in response to inter‐regional utility differentials. Each region has households, firms and a regional government. In addition to regional governments, there is a federal government. The firms in a region use a single factor, labour, to produce a single good which we assume to be different to that produced in the other region. It is supplied to households and to the regional government in the form of payroll taxes. Households consume some, trade some with households in the other region and give some up to the federal government as income tax. Firms and households bargain over wages and firms then choose employment to maximise profits. The resulting equilibrium will generally not be a full‐employment one. We simulate a linearised numerical version of the model. We examine seven alternative policies, six carried out by a regional government and one by the federal government. In the first group there are traditional tax/expenditure polices as well as policies which might be seen as attacking the natural rate of unemployment: changes in unemployment benefits, changes in union power, changes in the labour force and changes in labour productivity. The federal government policy is a regionally‐differentiated fiscal policy. Contrary to expectations, many policies which have traditionally been recommended to alleviate unemployment are found, in fact, to exacerbate the unemployment problem.