Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State
AbstractThere is a heated debate in many European countries about a move towards a welfare system that increases the incentives for lone mothers to move off welfare and into work. We analyze the consequences of a major Norwegian workfare reform of the generous welfare system for lone mothers. Our difference-in-differences estimates show that the policy changes were successful in improving labor market attachment and increasing disposable income of new lone mothers. By contrast, the reform led to a substantial decrease in disposable income and a significant increase in poverty among persistent lone mothers, because a sizeable group was unable to offset the loss of out-of-work welfare benefits with gains in earnings. This suggests that the desired effects of the workfare reform were associated with the side-effects of income loss and increased poverty among a substantial number of lone mothers with insurmountable employment barriers. This finding stands in stark contrast to evidence from similar policy changes in Canada, the UK, and the US, and underscores that policymakers from other developed countries should be cautious when drawing lessons from the successful welfare reforms implemented in Anglo-Saxon countries.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4489.
Length: 30 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Scandinavian Journal of Economics, 2012, 114 (4), 1129–1159
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Other versions of this item:
- Magne Mogstad & Chiara Pronzato, 2012. "Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1129-1159, December.
- Magne Mogstad & Chiara Pronzato, 2008. "Are lone mothers responsive to policy changes? The effects of a Norwegian workfare reform on earnings, education and poverty," Working Papers 008, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty
- I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J00 - Labor and Demographic Economics - - General - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-HAP-2009-11-07 (Economics of Happiness)
- NEP-LAB-2009-11-07 (Labour Economics)
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