The impact of welfare reform on labour supply behaviour in New Zealand

New Zealand recently implemented sweeping reforms to its social welfare pro grammes by cutting benefits and tightening eligibility criteria. Regression analysis is used in this paper to isolate the effects of these reforms on several dimensions of labour supply behaviour. Overseas research in this ar ea has often been hindered by the difficulty of boiling complex work disinc entives down to a manageable set of regressors, or the lack of true variati on in programme parameters. The structure of the benefit system and the nat ure of the reforms in New Zealand provide a unique opportunity to identify these behavioural responses. Quarterly random samples of individuals betwee n 1985:4 and 1995:4 are used to isolate the effects of these policies, whil e controlling for a wide variety of other influences. This study finds comp elling evidence that these reforms increased aggregate labour supply in thi s country. (C) 2000 Elsevier Science B.V. All rights reserved.