This paper analyses the effects of a social assistance reform in Germany. In contrast to studies which are based on microsimulation methods we use a computable general equilibrium model which incorporates a discrete choice model of labour supply to simulate a variety of reform scenarios. The...

We report empirical evidence from the first field experiments to be conducted in Germany with program and control groups between 1999 and 2002. The evaluated program called ?Targeted Negative Income Tax (TNIT)? is a time-restricted employee subsidy for means-tested welfare recipients. We focus...

In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level...

Changing the income tax progressivity in labour markets with collective wage bargaining generates a trade-off. On the one hand, higher progressivity distorts individual labour supply decisions at the hours-of-work margin, on the other hand, it reduces unemployment by exerting downward pressure...

The social norm of unemployment suggests that aggregate unemployment reduces the well-being of the employed, but has a far smaller effect on the unemployed. We use German panel data to reproduce this standard result, but then suggest that the appropriate distinction may not be between employment...

Does the supply of a welfare state create its own demand? Many economic scholars studying welfare arrangements refer to Say's law and insinuate a self-destructive welfare state. However, little is known about the empirical validity of these assumptions and hypotheses. We study the dynamic effect...

We apply the Day Reconstruction Method to compare unemployed and employed people with respect to their subjective assessment of emotional affects, differences in the composition and duration of activities during the course of a day, and their self-reported life satisfaction. Employed persons are...

We use the differences between life satisfaction and emotional well-being of employed and unemployed persons to analyze how a person's employment status affects cognitive well-being. Our results show that unemployment has a negative impact on cognitive, but not on affective well-being, which we...