An empirical analysis of welfare dependence in the Czech Republic

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Authors

GUZI Martin

Year of publication 2014
Type Article in Periodical
Magazine / Source Czech Journal of Economics and Finance
MU Faculty or unit

Faculty of Economics and Administration

Citation
Web http://journal.fsv.cuni.cz/mag/article/show/id/1309
Field Economy
Keywords labor supply; welfare trap; net replacement rate
Description The scope of this paper is to empirically test whether the potential disincentive effects of the Czech social security system affected the labor flows from unemployment to employment over the period 1995-2005. Combining individual data from the Czech Labor Force Survey and the Czech Household Income Survey, the analysis exploits the difference between the available social benefits and the net household income when a person is employed. Estimates imply that individuals who receive relatively higher social benefits are also more likely to remain unemployed and it is shown that the groups most affected are those with low education and long spells of unemployment. The paper confirms that the level and persistence of unemployment in the Czech Republic after 2000 can be partly attributed to the nationwide level of social support that constitutes a welfare trap for some individuals.
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