Review of Economic Studies Vol. 84 No. 4 2017
Welfare Dependence and Self-Control: An Empirical Analysis
Abstract
A hyperbolic discounting model of labour supply and welfare participation with heterogeneous time preference parameters is estimated. Exclusion restrictions are constructed from variations in behaviour induced by time limits in a welfare reform experiment. We find that most individuals are time-inconsistent, and they exhibit varying degrees of present bias and perception of the commitment problem. Introducing a welfare component to the tax system can make individuals worse off by aggravating the commitment problem. Certain dynamic policy interventions carry sizeable commitment-related work incentives; for instance, a dynamic sanction triggered by past employment can be preferred by some individuals as a commitment device.
- DOI
- 10.1093/restud/rdx011
- Volume
- 84
- Issue
- 4
- Pages
- 1379-1423
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref