1. Reforming Social Welfare in Germany: An Applied General Equilibrium Analysis
- Author
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Nicole Gürtzgen, Reinhold Schnabel, and Stefan Boeters
- Subjects
Computable general equilibrium ,Macroeconomics ,Economics and Econometrics ,050208 finance ,General equilibrium theory ,media_common.quotation_subject ,Partial equilibrium ,05 social sciences ,Wage ,jel:J51 ,jel:D58 ,Applied general equilibrium ,Microeconomics ,jel:J22 ,Labour supply ,social assistance,discrete labour supply model,applied general equilibrium ,0502 economics and business ,Unemployment ,Economics ,Dynamic stochastic general equilibrium ,050207 economics ,media_common - Abstract
In this paper, the effects of social assistance reform proposals are discussed for the case of Germany using a computable general equilibrium model that incorporates a discrete choice model of labour supply. This allows us to identify general equilibrium effects of the reforms on wages and unemployment. The simulation results show that general equilibrium wage reactions mitigate labour supply effects and that unemployment in fact decreases. Wage reactions are thus sufficiently strong to prevent additional labour supply from translating into higher unemployment. The simulations indicate that major cuts in welfare payments are necessary to produce substantial employment effects.
- Published
- 2006