Does Work Pay in France? Monetary Incentives and the Guaranteed Minimum Income
AbstractMost welfare programs generate high marginal tax rates on labor income. This paper uses a representative sample of individuals on France's main welfare program (the Revenu Minimum d'Insertion, or RMI) to estimate monetary gains to employment for welfare recipients. This is based on the distribution of potential monthly earnings faced by each individual, as inferred from the distribution of observed wages and working time. Taking account of the welfare earnings top-up program (intéressement), we find that gains are almost always positive, but that their amount is very low, especially for single mothers. Intéressement is found to have a small impact, because of its provisional nature. Gains are positively related to the probability that a welfare recipient in 1996 will be observed in employment in 1998. Using a simple structural model, we interpret this as a labor supply effect.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1467.
Length: 42 pages
Date of creation: Jan 2005
Date of revision:
Publication status: published as 'Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum' in: Journal of Public Economics, 2008, 92 (7), 1669-1697
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Other versions of this item:
- Marc Gurgand & David Margolis, 2005. "Does work pay in France? Monetary incentives and the guaranteed minimum income," Cahiers de la Maison des Sciences Economiques bla05002, Université Panthéon-Sorbonne (Paris 1).
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-01-23 (All new papers)
- NEP-EDU-2005-01-23 (Education)
- NEP-EEC-2005-01-23 (European Economics)
- NEP-LAB-2005-01-23 (Labour Economics)
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