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Does work pay in France? Monetary incentives and the guaranteed minimum income

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Listed:
  • Marc Gurgand

    (PSE, CREST and IRES)

  • David Margolis

    (TEAM)

Abstract

Most 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

Suggested Citation

  • 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).
    • Handle: RePEc:mse:wpsorb:bla05002
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    References listed on IDEAS

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    Cited by:

    1. Libertad González Luna, 2005. "Single mothers and incentives to work: The French experience," Economics Working Papers 818, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Anna Laura Mancini, 2007. "Labor supply responses of Italian women to minimum income policies," CHILD Working Papers wp14_07, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
    3. Ayala, Luis & Rodriguez, Magdalena, 2006. "The latin model of welfare: Do `insertion contracts' reduce long-term dependence?," Labour Economics, Elsevier, vol. 13(6), pages 799-822, December.
    4. Libertad González, 2008. "Single Mothers, Welfare, and Incentives to Work," LABOUR, CEIS, vol. 22(3), pages 447-468, September.

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    More about this item

    Keywords

    Welfare; labor earnings; transfers; tax-system;
    All these keywords.

    JEL classification:

    • 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

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