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Welfare Benefits and Labor Supply: Evidence from a natural experiment in Japan

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  • YUGAMI Kazufumi
  • MORIMOTO Atsushi
  • TANAKA Yoshiyuki
  • MATSUMOTO Kodai

Abstract

We use municipal amalgamations in Japan to identify the impact of welfare benefits on labor supply. In municipal amalgamations, under Japan’s Public Assistance (PA) program, municipalities with the highest class-areas become the new municipality and the basis for calculating welfare benefit levels. We use a difference-in-differences approach to identify the effect of the increase in PA benefits in Japan after municipal amalgamations on the labor supply. We found that an increase in PA benefit levels has little impact on the employment rate of prime-age populations but decreases that of bereaved or divorced women by 1.2% to 1.8%.

Suggested Citation

  • YUGAMI Kazufumi & MORIMOTO Atsushi & TANAKA Yoshiyuki & MATSUMOTO Kodai, 2017. "Welfare Benefits and Labor Supply: Evidence from a natural experiment in Japan," Discussion papers 17109, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:17109
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    References listed on IDEAS

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    1. Fortin, Bernard & Lacroix, Guy & Drolet, Simon, 2004. "Welfare benefits and the duration of welfare spells: evidence from a natural experiment in Canada," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1495-1520, July.
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    5. Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.
    6. Bargain, Olivier & Doorley, Karina, 2011. "Caught in the trap? Welfare's disincentive and the labor supply of single men," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1096-1110, October.
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    Cited by:

    1. Masayoshi Hayashi, 2021. "Transfer Benefits, Implicit Taxes, and the Earnings of Welfare Recipients: Evidence from Public Assistance Programs in Japan," CIRJE F-Series CIRJE-F-1164, CIRJE, Faculty of Economics, University of Tokyo.

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