Empirical Welfare Analysis in Random Utility Models of Labour Supply
Katholieke Universiteit Leuven Department of Economics Discussion Paper No. 10.30
36 Pages Posted: 20 Nov 2010
There are 4 versions of this paper
Empirical Welfare Analysis in Random Utility Models of Labour Supply
Empirical Welfare Analysis in Random Utility Models of Labour Supply
Empirical Welfare Analysis in Random Utility Models of Labour Supply
Empirical Welfare Analysis in Random Utility Models of Labour Supply
Date Written: November 1, 2010
Abstract
The aim of this paper is to apply recently proposed individual welfare measures in the context of random utility models of labour supply. Contrary to the standard practice of using reference preferences and wages, these measures preserve preference heterogeneity in the normative step of the analysis. They also make the ethical priors, implicit in any interpersonal comparison, more explicit.
On the basis of microdata from the Socio Economic Panel (SOEP) for married couples in Germany, we provide empirical evidence about the sensitivity of the welfare orderings to different normative principles embodied in these measures. We retrieve individual and household specific preference heterogeneity, by estimating a structural discrete choice labor supply model. We use this preference information to construct welfare orderings of households according to the different metrics, each embodying different ethical choices concerning the preference heterogeneity in the consumption-leisure space. We then discuss how sensitive the assessment of a hypothetical tax reform is to the choice of metric. The chosen tax reform is similar to a subsidy of social security contributions.
Keywords: Welfare Measures, Labour Supply, Random Utility, Preference Heterogeneity
JEL Classification: C35, D63, D78, H24, H31, J22
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses
-
Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under Afdc-Up
-
Welfare Reform in European Countries: A Microsimulation Analysis
By Herwig Immervoll, Henrik Jacobsen Kleven, ...
-
Welfare Reform in European Countries: A Micro-Simulation Analysis
By Herwig Immervoll, Henrik Jacobsen Kleven, ...
-
Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment
By Nada Eissa
-
By Nada Eissa, Henrik Jacobsen Kleven, ...