The Transition from Welfare to Work and the Role of Potential Labor Income. Hilmar Schneider (IZA, DIW Berlin) Arne Uhlendorff (DIW Berlin, IZA). The Transition from Welfare to Work and the Role of Potential Labour Income. Introduction Literature Social assistance in Germany
The Transition from Welfare to Work and the Role of Potential Labor Income
Hilmar Schneider (IZA, DIW Berlin)
Arne Uhlendorff (DIW Berlin, IZA)
Figure 1: Development of the expenditures for social assistance in Germany
Aim of the Study:
Estimating the Effect of the Ratio between the potential labor income and the amount of social assistance on the probability of a transition from welfare to work
Data: GSOEP 1992-2000
Discrete time Hazard Rate Models with competing risks
Derives a higher transition probability from a higher acceptance probability or from a higher job offer arrival rate?
Estimation of gross market wages of all heads of the household and their partner
2.Potential net income: Highest gross income accounting for income taxes, social security contri- butions and child allowance
3.Amount of social assistance: calculate the maximum of social assistance
4.Calculation of the ratio between potential labour income and social assistance
Pooled sample using the GSOEP waves 1991-1999
Ratio 1: takes on the ratio value if the ratio is below 1 (25%)
Ratio 2: takes on the ratio value if the 1 < ratio < 1.5(45%)
Ratio 3: takes on the ratio value if the ratio is above 1.5 (29%)
Random Effects Piecewise Exponential Model
Risk-specific Transition rate:
Destination-specific components have to be maximized jointly.
1< income ratio<1.5 : + 0.1 + 10% trans. prob.
1.5 income ratio: + 0.1 + 7% trans. prob.
- What are the alternative transitions besides from welfare to work?
- Which income situations do we observe following a transition to work?