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Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State

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Author Info
Mogstad, Magne () (Statistics Norway)
Pronzato, Chiara () (University of Essex)
Abstract

There 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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4489.

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Length: 30 pages
Date of creation: Oct 2009
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Handle: RePEc:iza:izadps:dp4489

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Related research
Keywords: lone mothers; workfare reform; difference-in-differences; heterogeneity; earnings; labor force participation; poverty; disposable income;

Find related papers by JEL classification:
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data
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

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This page was last updated on 2009-11-30.

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