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Assessing the Impact of a Wage Subsidy for Single Parents on Social Assistance

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  • Guy Lacroix

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Abstract

In 2002 the Quebec government implemented the “Action Emploi" (AE) program aimed at making work pay for long-term social assistance recipients (SA). AE offered a generous income supplement that could last up to three years to recipients who found a full-time job within twelve months. The program was implemented for a trial period of one year. Based on little empirical evidence, a slightly modified version of the program was implemented on a permanent basis in May 2008. The paper investigates the impact of the temporary program by focusing on the labour market transitions of the targeted population starting one year before the implementation of the program and up until the end of 2005. We use a multi-state multi-episode model. The endogeneity of the participation status is accounted for by treating AE as a distinct state and by allowing correlated unobserved factors to affect the transitions. The model is estimated by the method of simulated moments. Our results show that AE has indeed increased the duration of Off-SA spells and decreased the duration of SA spells slightly. There is also some evidence that the response to the program varies considerably with unobserved individual characteristics. En 2002, le gouvernement du Québec a mis sur pied le programme Action emploi (AE) qui visait à mieux rémunérer le travail des prestataires de l’aide sociale (AS) de longue durée. AE offrait un supplément de revenu généreux pouvant s’échelonner sur une période d’au plus trois ans aux prestataires ayant trouvé un emploi à temps plein à l’intérieur de 12 mois. Le programme a été mis en œuvre pendant une période d’essai d’un an. Sur la base d’une faible évidence empirique, une version légèrement modifiée du programme a été adoptée de façon permanente en mai 2008. Le document examine l’incidence du programme temporaire en mettant l’accent sur les transitions de la population ciblée sur le marché du travail, à compter de l’année précédant la mise en œuvre du programme jusqu’à la fin de 2005. Nous utilisons un modèle multi-états et multi-épisodes. Afin de prendre en compte l’endogénéité du statut de participation, nous considérons que le programme AE est un état distinct et nous permettons à des facteurs latents corrélés d’influencer les transitions. Le modèle est évalué par la méthode du maximum de vraisemblance simulée. Nos résultats démontrent que le programme a effectivement augmenté la durée des périodes de sortie de l’AS et diminué légèrement la durée des périodes de recours à l’AS. Le document montre également que la réponse au programme varie considérablement en fonction des caractéristiques individuelles latentes.

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Bibliographic Info

Paper provided by CIRANO in its series CIRANO Working Papers with number 2010s-19.

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Date of creation: 01 Apr 2010
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Handle: RePEc:cir:cirwor:2010s-19

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Keywords: ; assistance sociale; supplément de revenu; modèle de transition multi-états et multi-épisodes.;

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Cited by:
  1. Fanny Moffette & Dorothée Boccanfuso & Patrick Richard & Luc Savard, 2013. "Estimating the Impact of the Québec’s Work Incentive Program on Labour Supply: An Ex Post Microsimulation Analysis," Cahiers de recherche 13-01, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  2. Rainer Eppel & Helmut Mahringer, 2013. "Do Wage Subsidies Work in Boosting Economic Inclusion? Evidence on Effect Heterogeneity in Austria," WIFO Working Papers 456, WIFO.

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