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Caught in the Trap? The Disincentive Effect of Social Assistance

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Author Info

  • Bargain, Olivier

    ()
    (University of Aix-Marseille II)

  • Doorley, Karina

    ()
    (IZA)

Abstract

While financial incentives usually have a significant effect on the labor supply of married women and single mothers, the evidence about the participation elasticity of childless singles, and single males especially, is more scant. This is, however, important in countries like France and Germany, where single individuals constitute the core of social assistance recipients. As yet, there is no conclusive evidence about whether, and to what extent, this group is affected by the financial disincentives embedded in the generous redistributive programs in place in these countries. In this paper, we exploit a particular feature of the main welfare scheme in France (Revenu Minimum d'Insertion, RMI), namely that childless adults under age 25 are not eligible for it. Using a regression discontinuity approach and the French micro-census data, we find that the RMI reduces the employment of uneducated single men by 7%-10%. Important policy implications are drawn.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4291.

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Length: 34 pages
Date of creation: Jul 2009
Date of revision:
Publication status: published in: Journal of Public Economics, 2011, 95 (9-10), 1096-1110
Handle: RePEc:iza:izadps:dp4291

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Keywords: social assistance; welfare; regression discontinuity; labor supply;

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References

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Cited by:
  1. Paolo Verme, 2010. "Happiness, deprivation and the alter ego," Working Papers 155, ECINEQ, Society for the Study of Economic Inequality.

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