A Structural Model of Multiple Welfare Program Participation and Labor Supply

Keane, Michael P.; Moffitt, Robert A.

doi:10.2307/2527390

Cited by 444 publications

(427 citation statements)

References 9 publications

(18 reference statements)

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“…Despite the long tradition in modelling behaviour in economics, the behavioural reactions to changes in the tax system that are most commonly analysed are related to labour supply (starting from the seminal contributions of Aaberge et al 1995 andvan Soest 1995) and programme participation (Keane and Moffitt, 1998), feeding into a growing literature, which is characterised by an increasing level of econometric sophistication. The same level of development does not yet apply to other research areas where microsimulation models have been used, e.g.…”

Section: Accounting For Individual Reactionsmentioning

confidence: 99%

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Microsimulation and Policy Analysis

Figari

Paulus

Sutherland

2015

Handbook of Income Distribution

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ISER Working Paper Series www.iser.essex.ac.uk Microsimulation and Policy AnalysisNon-technical summary This paper is prepared as a chapter forthcoming in the Handbook of Income Distribution, Volume 2 (edited by A. B. Atkinson and F. Bourguignon, Elsevier-North Holland). Microsimulation methods are increasingly used to study the effects of policies on the income distribution contributing both to policy debates and academic literature. In general terms, microsimulation refers to modelling changes in the state or behaviour of micro-level units. We provide an overview of approaches that address questions related to the impact of taxbenefit policies on household income distribution. We first discuss how microsimulation modelling contributes to the analysis of the income distribution more broadly, pointing out that it can enrich survey and administrative data by checking its consistency, adding further details and enhancing analytical flexibility. In addition, it provides the basis for calculating indicators that cannot otherwise be estimated directly from micro-data such as measures of work incentives, net support for children and automatic stabilisers embedded in tax-benefit systems. We then focus more specifically on the role of microsimulation in policy evaluation. Taxbenefit models can provide information on household disposable income and its components under various policy scenarios and as such constitute a unique tool for ex ante policy analysis, though equally can be used for ex post analysis. We review the formal framework underlying such microsimulation-based decomposition analysis of income distribution and suggest a broader perspective to accommodate a wider range of applications. Our main emphasis is on static modelling methods, though we also consider extensions accounting for behavioural reactions and links with macroeconomic models. As microsimulation models are often concerned with current and future policies, we discuss various approaches to predict the income distribution given that data providing information on the current situation becomes available with a time lag, distinguishing between nowcasting and forecasting. We emphasise the role of comparative analysis as cross-country differences in tax-benefit systems and population structures provide a basis to assess the robustness of results and generalise conclusions. We provide empirical illustrations drawing mainly on analysis using the EU-wide tax-benefit model EUROMOD. Covering 27 countries and made generally accessible this is now one of the most widely used models. There are many remaining challenges to providing estimates of the effects of policy and policy changes that can be used with confidence within policy analysis and we consider three major issues: reconciling the simulated income distribution and that measured using the original micro-data; accounting for benefit non take-up and tax non-compliance, as well as validating and assessing the statistical reliability of microsimulation estimates. While our main focus is on the distributio...

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Section: Accounting For Individual Reactionsmentioning

confidence: 99%

“…Dorsett and Heady, 1991;Hancock et al, 2004), interactions with labour supply (e.g. Moffitt, 1983;Keane and Moffitt, 1998;Walker, 1997 and2001) or dynamics in the take-up behaviour (e.g. Blank and Ruggles, 1996;Anderson and Meyer, 1997).…”

Section: Modelling Non Take-up and Non-compliancementioning

confidence: 99%

Microsimulation and Policy Analysis

Figari

Paulus

Sutherland

2015

Handbook of Income Distribution

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“…A tax policy reform has the effect of changing individuals' net incomes corresponding to each discrete hours point. 6 Subsection 2.3 describes the numerical procedure used to generate the distribution of hours worked following a tax policy reform, conditional on each individual being at the observed position before the reform.…”

Section: Discrete Hours Labour Supplymentioning

confidence: 99%

“…6 Some reforms modify eligibility conditions, and the enforcement of rules, in ways which cannot be modelled using current methods, but which may affect the take-up of benefits. 7 An early example of its use can be found in Keane and Moffitt (1998).…”

Section: Personal Characteristics' Effects On Utilitymentioning

confidence: 99%

Confidence Intervals for Policy Reforms in Behavioural Tax Microsimulation Modelling

Creedy¹,

Kalb

Kew³

2007

Bulletin of Econ Res

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This paper addresses the need for a measure of the uncertainty that is associated with the results calculated through tax policy behavioural microsimulation modelling. Deriving the analytical measure would be extremely complicated, therefore, a simulated approach is proposed which generates a pseudo sampling distribution of aggregate measures based on the sampling distribution of the estimated labour supply parameters. This approach, which is very computer intensive, is compared to a more time-efficient approach where the functional form of the sampling distribution is assumed to be normal. The results show that in many instances the results from the two approaches are quite similar. The exception is when aggregate measures for minor types of payments, involving relatively small groups of the population, are examined.

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“…Studies by Moffitt (1983), Blundell et al (1988), Duclos (1995), Bollinger and David (1997) and Keane and Moffitt (1998) are examples of the development of this literature. Means-testing is an obvious way of focusing welfare spending on those most in need, while controlling the burden on public finances.…”

Section: Introductionmentioning

confidence: 97%

The welfare cost of means‐testing: pensioner participation in income support

Alava

Pudney

Hancock

2007

J of Applied Econometrics

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SUMMARYWe estimate parametric and semi-parametric binary choice models of benefit take-up by British pensioners and use a revealed preference argument to infer the cash-equivalent value of disutility arising from stigma or complexity of the claims process. These implicit costs turn out to be relatively small, averaging about £3-4 per week across Income Support recipients. Using the Foster-Greer-Thorbecke measure of poverty among pensioners, we find that allowing for implicit claim costs incurred by benefit recipients raises the measured degree of poverty by not more than 13%.

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A Structural Model of Multiple Welfare Program Participation and Labor Supply

Cited by 444 publications

References 9 publications

Microsimulation and Policy Analysis

Microsimulation and Policy Analysis

Confidence Intervals for Policy Reforms in Behavioural Tax Microsimulation Modelling

The welfare cost of means‐testing: pensioner participation in income support

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