Microsimulation models and labor supply responses to welfare reforms.
While in principle including behavioral responses in microsimulation models is always desirable, the intrinsic difficulty of modeling individual behavior and the utilization of the results by a policy audience argue for a cautious and motivated use of behavioral responses. We report simulations of...
| Published in: | Policy Studies Journal Vol. 25; pp. 39 - 59 |
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| Format: | Article |
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Wiley-Blackwell
Spring 1997
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| Online Access: | View this record in EBSCOhost |
| Summary: | While in principle including behavioral responses in microsimulation models is always desirable, the intrinsic difficulty of modeling individual behavior and the utilization of the results by a policy audience argue for a cautious and motivated use of behavioral responses. We report simulations of the effect on labor supply of four welfare reforms that affect female heads of households. We find that ignoring behavioral responses understates the disposable income gain (or overstates the losses) incurred by these families. In some cases the differences are trivial, while in others (the expansion of the Earned Income Tax Credit and the imposition of time limits) ignoring the labor supply response might provide a distorted view of the effects of the reform. Reprinted by permission of the publisher. |
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