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Evaluating the impact of the French tax credit on the employment rate of women

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This paper investigates the employment impact of a new tax-credit programme that was put in place in France in 2001. We study the introduction of both this measure and a later reform in 2004 that made the tax credit cashable in advance upon returning to work. We adopt a non-experimental evaluation method. The data for the analysis are drawn from the French Labour Force Surveys over the period 1999 to 2005. Due to the break in the French LFS series in 2003, we analyze separately the two periods 1999-2002 and 2003-05, as well as pooling the data over 1999-2005, under particular assumptions. We find evidence of a significantly negative employment effect for married women, with a reduction of about 3.2-3.4 percentage points in their employment rate after the introduction of the policy. The impact is positive and weakly significant for cohabiting women, while positive but statistically insignificant for lone mothers. We do not find any evidence of an additional effect of the tax credit due to the cashable advance credit reform of 2004.

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Bibliographic Info

Paper provided by Observatoire Francais des Conjonctures Economiques (OFCE) in its series Documents de Travail de l'OFCE with number 2007-33.

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Date of creation: 2007
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Handle: RePEc:fce:doctra:0733

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Keywords: policy evaluation; difference-in-differences estimator; labour supply;

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  1. V. Joseph Hotz & John Karl Scholz, 2001. "The Earned Income Tax Credit," NBER Working Papers 8078, National Bureau of Economic Research, Inc.
  2. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  3. Stephen R.G. Jones & W. Craig Riddell, 2002. "Unemployment and Non-Employment: Heterogeneities in Labour Market States," Department of Economics Working Papers 2002-05, McMaster University.
  4. Elena Stancanelli, 2007. "Marriage and Work: an analysis for French couples in the last decade," Documents de Travail de l'OFCE 2007-10, Observatoire Francais des Conjonctures Economiques (OFCE).
  5. Hilary Hoynes & Richard Blundell, 2001. "Has "In-Work" Benefit Reform Helped the Labour Market?," NBER Working Papers 8546, National Bureau of Economic Research, Inc.
  6. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes & Madeline Zavodny, 2004. "The Impact of Welfare Reform on Marriage and Divorce," Working Papers 110, RAND Corporation Publications Department.
  7. François Bourguignon & Thierry Magnac, 1990. "Labor Supply and Taxation in France," Journal of Human Resources, University of Wisconsin Press, vol. 25(3), pages 358-389.
  8. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2001. "Evaluating the employment impact of a mandatory job search assistance program," IFS Working Papers W01/20, Institute for Fiscal Studies.
  9. Mark B. Stewart, 2004. "The Impact of the Introduction of the U.K. Minimum Wage on the Employment Probabilities of Low-Wage Workers," Journal of the European Economic Association, MIT Press, vol. 2(1), pages 67-97, 03.
  10. Olivier Donni & Nicolas Moreau, 2005. "Collective Labor Supply: a Single-Equation Model and Some Evidence from French Data," Cahiers de recherche 0516, CIRPEE.
  11. Mark B. Stewart, 2004. "The employment effects of the national minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages C110-C116, 03.
  12. Gabor Kezdi, 2005. "Robus Standard Error Estimation in Fixed-Effects Panel Models," Econometrics 0508018, EconWPA.
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