TY - JOUR

T1 - Household labor supply and the gains from social insurance

AU - Fadlon, Itzik

AU - Nielsen, Torben Heien

PY - 2019/3

Y1 - 2019/3

N2 - The marginal gains from social income insurance programs are captured by the gap in the marginal utility of consumption across states of nature. To identify this gap in the context of the household, this paper offers a new labor-supply based approach that leverages household-level economic interactions and optimality conditions. We demonstrate that, in frameworks of efficient household allocations, spousal labor supply responses to shocks have direct implications for the gains from more generous government benefits to households. We show that this holds for both intensive and extensive margin responses under fairly general conditions. Our analysis illustrates how labor market data can be used for assessing marginal welfare gains in a general class of social insurance schemes, including the large and important programs of disability insurance and survivors benefits. Hence, household labor supply behavior and responses to shocks, which are widely studied in theoretical and empirical work, hold valuable information for the optimal design of social insurance.

AB - The marginal gains from social income insurance programs are captured by the gap in the marginal utility of consumption across states of nature. To identify this gap in the context of the household, this paper offers a new labor-supply based approach that leverages household-level economic interactions and optimality conditions. We demonstrate that, in frameworks of efficient household allocations, spousal labor supply responses to shocks have direct implications for the gains from more generous government benefits to households. We show that this holds for both intensive and extensive margin responses under fairly general conditions. Our analysis illustrates how labor market data can be used for assessing marginal welfare gains in a general class of social insurance schemes, including the large and important programs of disability insurance and survivors benefits. Hence, household labor supply behavior and responses to shocks, which are widely studied in theoretical and empirical work, hold valuable information for the optimal design of social insurance.

KW - Faculty of Social Sciences

KW - Social insurance

KW - Evaluation of welfare gains

KW - Household labor supply

U2 - 10.1016/j.jpubeco.2018.01.010

DO - 10.1016/j.jpubeco.2018.01.010

M3 - Journal article

C2 - 31435079

VL - 171

SP - 18

EP - 28

JO - Journal of Public Economics

JF - Journal of Public Economics

SN - 0047-2727

ER -