ABSTRACT
This chapter discusses the capacity of back-to-work allowances to solve work incentive problems. It suggests modeling labor force participation decisions in an inter-temporal framework to better value back to work gains for unemployed people. These gains include worker mobility between jobs. The chapter describes the observed probabilities of transitions between different kinds of jobs on the French labor market for different categories of workers. It also describes the observed incomes associated with each kind of job, to identify the categories of workers that face inactivity or poverty trap problems. The chapter presents a dynamic model of the labor decision. It also presents some empirical results regarding the French labor market. The chapter examines the work incentive problem in the French system. It shows the weakness of a static approach to labor force participation analysis and develops an inter-temporal approach to work incentive problems.
