Means-Tested Subsidies, Family Dynamics and Labor Supply of Men and Women
Prof. Thomas Jorgensen
Associate Professor at the Department of Economics
University of Copenhagen
Many government subsidies and transfer programs are means-tested on the household level, creating dis-incentives for secondary earners to participate in paid work. We investigate the extend to which such dis-incentives shape long-term labor market behavior and family dynamics. First, we document, linking several US data-sources, that receiving housing assistance (which is means-tested on the household level) is associated with reduced labor market supply and increased partnership dissolution. Especially for women.
Second, we use an estimated life cycle model in which couples bargain over market work and endogenously divorce, to analyze counterfactual policies. We find that individual means-testing would increase the welfare of women significantly while reducing the welfare of married men.
