Arbeitspapier

Empirical welfare analysis in random utility models of labour supply

The aim of this paper is to apply recently proposed individual welfare measures in the context of random utility models of labour supply. Contrary to the standard practice of using reference preferences and wages, these measures preserve preference heterogeneity in the normative step of the analysis. They also make the ethical priors, implicit in any interpersonal comparison, more explicit. On the basis of microdata from the Socio Economic Panel (SOEP) for married couples in Germany, we provide empirical evidence about the sensitivity of the welfare orderings to different normative principles embodied in these measures. We retrieve individual and household specific preference heterogeneity, by estimating a structural discrete choice labor supply model. We use this preference information to construct welfare orderings of households according to the different metrics, each embodying different ethical choices concerning the preference heterogeneity in the consumption-leisure space. We then discuss how sensitive the assessment of a hypothetical tax reform is to the choice of metric. The chose tax reform is similar to a subsidy of social security contributions.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 5301

Classification
Wirtschaft
Multiple or Simultaneous Equation Models: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Positive Analysis of Policy Formulation and Implementation
Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
Fiscal Policies and Behavior of Economic Agents: Household
Time Allocation and Labor Supply
Subject
welfare measures
labour supply
random utility
preference heterogeneity

Event
Geistige Schöpfung
(who)
Decoster, André
Haan, Peter
Event
Veröffentlichung
(who)
Institute for the Study of Labor (IZA)
(where)
Bonn
(when)
2010

Handle
Last update
10.03.2025, 11:46 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Decoster, André
  • Haan, Peter
  • Institute for the Study of Labor (IZA)

Time of origin

  • 2010

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