CHOOSING TO BECOME A ‘LOST CAUSE’:THE PERVERSE EFFECTS OF BENEFIT PRECONDITIONS

Abstract

This paper argues that preconditions for welfare benefit entitlements based on labour market prospects can be counterproductive when they create an incentive for individuals to abstain from any investment earlier in life that could improve future prospects. Benefit entitlements based partly on investments made prior to labour market entry are then Pareto-improving.Benefits, job search, irreversible investments