Authors	Bargain, O., Caliendo, M., Haan, P. and Orsini, K.
Year	2006
Reference	Journal of Population Economics, 23(1), 323-351.
Keywords	Tax-benefit systems, microsimulation, household labour supply, multinomial logit, involuntary unemployment, double-hurdle.
JEL-Classification	C25, C52, H31, J22
Presentations	XX Annual ESPE conference in Bologna (2006), Annual EALE conference in Prague (2006).
Download	Revised version from March 2006: PDF First version from December 2005: PDF
Abstract	We assess the labour supply effects of two 'making work pay' reforms in Germany. We provide evidence in favour of policies that distinguish between low effort and low productivity by targeting individuals with low wages rather than individuals with low earnings. In assessing the policies we account for demand-side constraints by using a double-hurdle model. We identify and decompose the potential bias of labour supply elasticities derived in standard unconstrained models. Although this bias is not significant when assessing policies which mainly target voluntarily unemployed workers (typically secondary earners), it is substantial for policies which affect groups with high shares of involuntary unemployment.