Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis |
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Authors: | Stefan Boeters,Nicole Gü rtzgen,Reinhold Schnabel |
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Affiliation: | Netherlands Bureau for Economic Policy Analysis (CPB), The Hague; Centre for European Economic Research (ZEW), Mannheim;University of Essen;Centre for European Economic Research (ZEW), Mannheim |
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Abstract: | Abstract. In this paper, the effects of social assistance reform proposals are discussed for the case of Germany using a computable general equilibrium model that incorporates a discrete choice model of labour supply. This allows us to identify general equilibrium effects of the reforms on wages and unemployment. The simulation results show that general equilibrium wage reactions mitigate labour supply effects and that unemployment in fact decreases. Wage reactions are thus sufficiently strong to prevent additional labour supply from translating into higher unemployment. The simulations indicate that major cuts in welfare payments are necessary to produce substantial employment effects. |
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Keywords: | D58 J22 J51 |
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