Do Private Income Transfers Increase Labor Market Risk?

Ralph Chami, Jeffrey H. Fischer
2000 Social Science Research Network  
In a two-stage model of private income transfers with a labor market, we find that the aggregate effect of such transfers induces labor market responses to the increase in moral hazard, thereby increasing the volatility of wages and lowering welfare. The equilibrium level of transfers exceeds the socially-optimum level.
doi:10.2139/ssrn.229258 fatcat:dtyhmbk3sbclxkeqtlqozppb3y