Household Labor Supply and Welfare Participation in Sweden

42 Pages Posted: 8 May 2003

See all articles by Lennart Flood

Lennart Flood

Goeteborg University - School of Business, Economics and Law; IZA Institute of Labor Economics

Jorgen Hansen

Concordia University, Quebec - Department of Economics; IZA Institute of Labor Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Roger Wahlberg

University of Gothenburg - School of Economics & Commercial Law

Date Written: April 2003

Abstract

In this paper, we formulate and estimate a structural, static model of household labor supply and multiple welfare program participation. Given the complicated nature of both the income tax schedule and the benefit rules for different welfare programs, we use unique access to a very detailed micro-simulation model to generate accurate budget sets for each work-welfare combination. Moreover, when determining the budget sets, we use extraordinary high-quality data on earnings and other types of incomes, obtained both from employers and from income tax records. The results suggest that labor supply among two-parent families in Sweden is quite inelastic. A policy simulation designed to increase labor supply incentives for low income families generated substantial positive welfare effects, despite only minor increases in labor supply and decreases in welfare participation.

Keywords: Household Labor Supply, Welfare, Unobserved Heterogeneity

JEL Classification: J2

Suggested Citation

Flood, Lennart and Hansen, Jorgen and Wahlberg, Roger, Household Labor Supply and Welfare Participation in Sweden (April 2003). Available at SSRN: https://ssrn.com/abstract=403962

Lennart Flood

Goeteborg University - School of Business, Economics and Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46 31 773 1331 (Phone)
+46 31 773 1043 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Jorgen Hansen (Contact Author)

Concordia University, Quebec - Department of Economics ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada
514-848-3924 (Phone)
514-848-4536 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Center for Interuniversity Research and Analysis on Organization (CIRANO) ( email )

2020 rue University, 25th floor
Montreal H3C 3J7, Quebec
Canada

Roger Wahlberg

University of Gothenburg - School of Economics & Commercial Law ( email )

Vasagatan 1, Box 640
Gothenburg, 40530
Sweden

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