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Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State

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  • Magne Mogstad
  • Chiara Pronzato

Abstract

There is a heated debate in many European countries about a move towards a welfare system that increases the incentives for lone mothers to move off welfare and into work. We analyze the consequences of a major Norwegian workfare reform of the generous welfare system for lone mothers. Our difference-in-differences estimates show that the policy changes were successful in improving labor market attachment and increasing disposable income of new lone mothers. By contrast, the reform led to a substantial decrease in disposable income and a significant increase in poverty among persistent lone mothers, because a sizeable group was unable to offset the loss of out-of-work welfare benefits with gains in earnings. This suggests that the desired effects of the workfare reform were associated with the side-effects of income loss and increased poverty among a substantial number of lone mothers with insurmountable employment barriers. This finding stands in stark contrast to evidence from similar policy changes in Canada, the UK, and the US, and underscores that policymakers from other developed countries should be cautious when drawing lessons from the successful welfare reforms implemented in Anglo-Saxon countries.

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File URL: http://hdl.handle.net/10.1111/j.1467-9442.2012.01722.x
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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 114 (2012)
Issue (Month): 4 (December)
Pages: 1129-1159

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Handle: RePEc:bla:scandj:v:114:y:2012:i:4:p:1129-1159

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Reiso, Katrine Holm, 2014. "The Effect of Welfare Reforms on Benefit Substitution," Discussion Paper Series in Economics 22/2014, Department of Economics, Norwegian School of Economics.
  2. Nina Drange & Mari Rege, 2012. "Trapped at Home: The Effect of Mothers' Temporary Labor Market Exits on their Subsequent Work Career," CESifo Working Paper Series 3833, CESifo Group Munich.
  3. Chiara Pronzato, 2013. "Fighting Lone Mothers' Poverty through in-Work Benefits - Methodological Issues and Policy Suggestions," CESifo Working Paper Series 4375, CESifo Group Munich.
  4. Løken, Katrine V. & Lommerud, Kjell Erik & Reiso, Katrine Holm, 2014. "Single Mothers and their children: Evaluating a work-encouraging welfare reform," Working Papers in Economics 04/14, University of Bergen, Department of Economics.
  5. Pronzato, Chiara Daniela, 2014. "Fighting Lone Mothers’ Poverty through In-Work Benefits Methodological Issues and Policy Suggestions," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201420, University of Turin.
  6. Drange, Nina & Rege, Mari, 2013. "Trapped at home: The effect of mothers' temporary labor market exits on their subsequent work career," Labour Economics, Elsevier, vol. 24(C), pages 125-136.
  7. Pronzato, Chiara D., 2012. "Comparing Quasi-Experimental Designs and Structural Models for Policy Evaluation: The Case of a Reform of Lone Parental Welfare," IZA Discussion Papers 6803, Institute for the Study of Labor (IZA).

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