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IZA
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The Transition from Welfare to Work and the Role of Potential Labor Income
by
Hilmar Schneider, Arne Uhlendorff
(December 2004)
published in: Journal of Applied Social Sciences Studies, 2005, 125 (1), 51-61
Abstract:
It is often argued that the high level of welfare claims in Germany causes little incentive for
workers with low productivity to seek for a job. We examine the influence of the ratio between
estimated potential labor income and the welfare payment level on the probability of leaving
social welfare. Using the GSOEP, we estimate a discrete time hazard rate model with
competing risks and unobserved heterogeneity. Our results show that the ratio has a positive
effect on the probability of leaving social welfare. This effect is especially relevant for
households with a potential labor income higher than their welfare payment level.
Text: See Discussion Paper No. 1420 
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