Year: 2024
Type: article
Abstract: Policymakers have increasingly turned to ‘in‐work transfers’ to boost incomes among poorer workers and strengthen work incentives. One attraction of these is that labour supply elasticities are typically greatest at the extensive margin. Because in‐work transfers are normally subject to earnings‐related phase‐outs, they tend to most strongly incentivize part‐time work, weakening incentives to increase hours beyond that. But if part‐time work generates relatively little in the way of human capital and career progression, then policy design should factor in the longer‐term consequences of labour supply choices along the intensive margin. To that end, we use a dynamic model of female labour supply with endogenous human capital accumulation, and study actual and hypothetical welfare reforms in the UK. We show that for a given expansion in the government budget, those reforms that incentivize full‐time work can do considerably more to increase incomes, including among poorer households, and to raise welfare. Our results suggest that in‐work transfers could be refined by paying greater attention to the intensive margin effects through the design of their phase‐outs.
Source: Economica
DOI: 10.1111/ecca.12548
Authors: David Goll, Robert Joyce, Tom Waters
Institutions: Institute for Fiscal Studies, University College London
Language: English
Subfield: Gender Studies
Field: Social Sciences
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,240
OpenAlex ID: W4401976211