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The Effect of Welfare Reforms on Benefit Substitution

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  • Reiso, Katrine Holm

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    (Dept. of Economics, Norwegian School of Economics and Business Administration)

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    Abstract

    Policy-makers have confronted welfare dependence and poverty among single mothers by imposing work requirements and time limits on the receipt of welfare benefits. Reforms with such features have generally reduced programme case-loads and increased the employment and earnings of single mothers. There is little evidence, however, on the amount of benefit substitution associated with such reforms. In this paper, we test whether reductions in welfare dependence may be offset by increased participation in other benefit programmes. Evaluating the restrictive reforms of the welfare programme for single mothers in Norway, we find evidence of considerable benefit substitution. Hence, decreases in programme case-loads do not reflect equal reductions in welfare dependence.

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    File URL: http://brage.bibsys.no/xmlui/bitstream/handle/11250/196300/1/workingpaper.pdf
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    Bibliographic Info

    Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 22/2014.

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    Length: 43 pages
    Date of creation: 30 Jun 2014
    Date of revision:
    Handle: RePEc:hhs:nhheco:2014_022

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    Postal: NHH, Department of Economics, Helleveien 30, N-5045 Bergen, Norway
    Phone: +47 55 959 277
    Fax: 5595 9100
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    Web page: http://www.nhh.no/sam/
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    Keywords: Welfare reform; welfare dependence; benefit substitution; single mothers.;

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    References

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    1. Lukas Inderbitzin & Stefan Staubli & Josef Zweimüller, 2013. "Extended unemployment benefits and early retirement: program complementarity and program substitution," ECON - Working Papers 119, Department of Economics - University of Zurich.
    2. Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," NBER Working Papers 7363, National Bureau of Economic Research, Inc.
    3. Karlström, Anders & Palme, Mårten & Svensson, Ingemar, 2008. "The employment effect of stricter rules for eligibility for DI: Evidence from a natural experiment in Sweden," Journal of Public Economics, Elsevier, vol. 92(10-11), pages 2071-2082, October.
    4. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
    5. Lammers, Marloes & Bloemen, Hans & Hochguertel, Stefan, 2013. "Job search requirements for older unemployed: Transitions to employment, early retirement and disability benefits," European Economic Review, Elsevier, vol. 58(C), pages 31-57.
    6. Mogstad, Magne & Pronzato, Chiara D., 2009. "Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State," IZA Discussion Papers 4489, Institute for the Study of Labor (IZA).
    7. Ghazala Naz, 2004. "The impact of cash-benefit reform on parents’ labour force participation," Journal of Population Economics, Springer, vol. 17(2), pages 369-383, 06.
    8. Marco Francesconi & Wilbert van der Klaauw, 2007. "The Socioeconomic Consequences of "In-Work" Benefit Reform for British Lone Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 42(1).
    9. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
    10. Bowen Garrett & Sherry Glied, 2000. "Does state AFDC generosity affect child SSI participation?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(2), pages 275-295.
    11. Lucie Schmidt & Purvi Sevak, 2004. "AFDC, SSI, and Welfare Reform Aggressiveness: Caseload Reductions versus Caseload Shifting," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
    12. 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.
    13. Henningsen, Morten, 2008. "Benefit shifting: The case of sickness insurance for the unemployed," Labour Economics, Elsevier, vol. 15(6), pages 1238-1269, December.
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    Cited by:
    1. 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.

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