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The Transition from Welfare to Work and the Role of Potential Labor Income


Hilmar Schneider


IZA Institute of Labor Economics; DIW Berlin, German Institute for Economic Research

Arne Uhlendorff


IZA Institute of Labor Economics

December 2004

IZA Discussion Paper No. 1420

Abstract:     
It is often argued that the high level of welfare claims in Germany causes little incentive for workers with low productivity to seek for a job. We examine the influence of the ratio between estimated potential labor income and the welfare payment level on the probability of leaving social welfare. Using the GSOEP, we estimate a discrete time hazard rate model with competing risks and unobserved heterogeneity. Our results show that the ratio has a positive effect on the probability of leaving social welfare. This effect is especially relevant for households with a potential labor income higher than their welfare payment level.

Number of Pages in PDF File: 35

Keywords: social welfare, labor supply, duration analysis

JEL Classification: I38, J64, C41


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Date posted: December 9, 2004  

Suggested Citation

Schneider, Hilmar and Uhlendorff, Arne, The Transition from Welfare to Work and the Role of Potential Labor Income (December 2004). IZA Discussion Paper No. 1420. Available at SSRN: https://ssrn.com/abstract=632344

Contact Information

Hilmar Schneider (Contact Author)
IZA Institute of Labor Economics ( email )
P.O. Box 7240
Bonn, D-53072
Germany

DIW Berlin, German Institute for Economic Research
Mohrenstraße 58
Berlin, 10117
Germany
Arne Uhlendorff
IZA Institute of Labor Economics ( email )
P.O. Box 7240
Bonn, D-53072
Germany

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