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

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Author Info
Marc Gurgand () (PSE, CREST and IRES)
David Margolis () (TEAM)

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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.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/cahiers2005/Bla05002.pdf
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Publisher Info
Paper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number bla05002.

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Length: 42 pages
Date of creation: Jan 2005
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Handle: RePEc:mse:wpsorb:bla05002

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Related research
Keywords: Welfare labor earnings transfers tax-system.

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Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare 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

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Robert A. Moffitt, 2003. "The Negative Income Tax and the Evolution of U.S. Welfare Policy," NBER Working Papers 9751, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive Versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, MIT Press, vol. 117(3), pages 1039-1073, August. [Downloadable!] (restricted)
    Other versions:
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January. [Downloadable!] (restricted)
  4. Robert Moffitt, 2002. "Welfare Programs and Labor Supply," NBER Working Papers 9168, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Euwals, Rob & van Soest, Arthur, 1999. "Desired and actual labour supply of unmarried men and women in the Netherlands," Labour Economics, Elsevier, vol. 6(1), pages 95-118, March. [Downloadable!] (restricted)
    Other versions:
  6. Mitali Das & Whitney K. Newey & Francis Vella, 2003. "Nonparametric Estimation of Sample Selection Models," Review of Economic Studies, Blackwell Publishing, vol. 70(1), pages 33-58, January.
  7. Gurgand, M. & Margolis, D., 2000. "Minima sociaux et revenus du travail en France," Papers 2000-62, Institut National de la Statistique et des Etudes Economiques-.
  8. David N. Margolis, 1995. "Cohort Effects and Returns to Seniority in France," CIRANO Working Papers 95s-46, CIRANO. [Downloadable!]
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  9. Dickens, William T & Lundberg, Shelly J, 1993. "Hours Restrictions and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 169-92, February. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
  2. 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. [Downloadable!]
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