The Heterogeneous Effects of Social Assistance and Unemployment Insurance: Evidence from a Life Cycle Model of Family Labor Supply and Savings
American Economic Journal: Macroeconomics
vol. 16,
no. 2, April 2024
(pp. 127-81)
Abstract
We empirically analyze the heterogeneous welfare effects of unemployment insurance and social assistance. We estimate a structural life cycle model of singles' and married couples' labor supply and savings decisions. The model includes heterogeneity by age, education, wealth, sex, and household composition. In aggregate, social assistance dominates unemployment insurance; however, the opposite holds true for married men, whose leisure time declines more than that of their spouses when unemployment insurance is reduced. A revenue-neutral rebalancing of social support away from unemployment insurance and toward social assistance increases aggregate welfare. Income pooling in married households decreases the welfare value of social assistance.Citation
Haan, Peter, and Victoria Prowse. 2024. "The Heterogeneous Effects of Social Assistance and Unemployment Insurance: Evidence from a Life Cycle Model of Family Labor Supply and Savings." American Economic Journal: Macroeconomics, 16 (2): 127-81. DOI: 10.1257/mac.20200217Additional Materials
JEL Classification
- D13 Household Production and Intrahousehold Allocation
- D15 Intertemporal Household Choice; Life Cycle Models and Saving
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
- J22 Time Allocation and Labor Supply
- J64 Unemployment: Models, Duration, Incidence, and Job Search
- J65 Unemployment Insurance; Severance Pay; Plant Closings
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