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The Heterogeneous Effects of Social Assistance and Unemployment Insurance: Evidence from a Life-Cycle Model of Family Labor Supply and Savings

Discussion Papers 2040, 23 S., Appendix

Peter Haan, Victoria Prowse


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Published in: American Economic Journal: Macroeconomics 16 (2024), 2, 127-181


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.

Peter Haan

Head of Department in the Public Economics Department

JEL-Classification: J18;J58;H21;I38
Keywords: Life-cycle labor supply, family labor supply, unemployment insurance, social assistance, household savings, employment risk, added worker effect, intra-household insurance
Frei zugängliche Version: (econstor)