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Incentive Effects of Social Assistance: A Regression Discontinuity Approach

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Author Info
Lemieux, Thomas
Milligan, Kevin

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Abstract

Before 1989, childless social assistance recipients in Quebec under age 30 received much lower benefits than recipients over age 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment. The estimates exhibit little sensitivity to the degree of flexibility in the specification, and perform very well when we control for unobserved heterogeneity using a first difference specification. Finally, we show that commonly used difference-in-differences estimators may perform poorly with inappropriately chosen control groups.

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Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2006280e.

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Date of creation: 14 Jun 2006
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Handle: RePEc:stc:stcp3e:2006280e

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Keywords: Labour Income pensions spending and wealth Employment insurance social assistance and other transfers Low income and inequality

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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. Fortin, Bernard & Lacroix, Guy & Drolet, Simon, 2004. "Welfare benefits and the duration of welfare spells: evidence from a natural experiment in Canada," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1495-1520, July. [Downloadable!] (restricted)
  2. Robert Moffitt, 2001. "The Temporary Assistance for Needy Families Program," Economics Working Paper Archive 463, The Johns Hopkins University,Department of Economics.
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  3. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March. [Downloadable!] (restricted)
  4. Martin Dooley & Stéphane Gascon & Pierre Lefebvre & Philip Merrigan, 1999. "Lone Female Headship and Welfare Policy in Canada," Cahiers de recherche CREFE / CREFE Working Papers 76, CREFE, Université du Québec à Montréal. [Downloadable!]
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  5. Robert Moffitt, 2002. "Welfare Programs and Labor Supply," NBER Working Papers 9168, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Kapsalis, Costa & McKenzie, Robert, 2001. "An Assessment of EI and SA Reporting in SLID," Analytical Studies Branch Research Paper Series 2001166e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
  7. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall. [Downloadable!] (restricted)
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  8. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
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  9. Carol Harvey & Michael J. Camasso & Radha Jagannathan, 2000. "Evaluating Welfare Reform Waivers under Section 1115," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 165-188, Fall. [Downloadable!] (restricted)
  10. Thomas Lemieux & Kevin Milligan, 2004. "Incentive Effects of Social Assistance: A Regression Discontinuity Approach," NBER Working Papers 10541, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Baker, Michael & Payne, A. Abigail & Smart, Michael, 1999. "An empirical study of matching grants: the 'cap on CAP'," Journal of Public Economics, Elsevier, vol. 72(2), pages 269-288, May. [Downloadable!] (restricted)
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  12. Marianne Bitler & Jonah Gelbach & Hilary Hoynes, 2004. "Welfare Reform and Health," NBER Working Papers 10549, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  13. Hilary Williamson Hoynes, 2000. "Local Labor Markets And Welfare Spells: Do Demand Conditions Matter?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 351-368, August. [Downloadable!] (restricted)
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  14. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-29, April. [Downloadable!] (restricted)
  15. Kevin Milligan, 2005. "Subsidizing the Stork: New Evidence on Tax Incentives and Fertility," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 539-555, 06. [Downloadable!] (restricted)
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  16. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2003. "Welfare Reform and Children's Living Arrangements," Working Papers 111, RAND Corporation Publications Department. [Downloadable!]
  17. Garry F. Barrett & Michael I. Cragg, 1998. "An Untold Story: The Characteristics of Welfare Use in British Columbia," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 165-188, February.
  18. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation Of Elementary Education," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 577-599, May. [Downloadable!] (restricted)
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  19. David S. Lee & David Card, 2006. "Regression Discontinuity Inference with Specification Error," NBER Technical Working Papers 0322, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
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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. Rafael Lalive, 2006. "How do Extended Benefits affect Unemployment Duration? A Regression Discontinuity Approach," IEW - Working Papers iewwp294, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  2. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Working Papers 13039, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Ott-Siim Toomet, 2005. "Does an Increase in Unemployment Income Lead to Longer Unemployment Spells? Evidence Using Danish Unemployment Assistance Data," Bank of Estonia Working Papers 2005-09, Bank of Estonia, revised 10 Oct 2005. [Downloadable!]
  4. Lemieux, Thomas & Milligan, Kevin, 2006. "Incentive Effects of Social Assistance: A Regression Discontinuity Approach," Analytical Studies Branch Research Paper Series 2006280e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
    Other versions:
  5. Matthew Brzozowski, 2005. "Welfare Reforms and Consumption Among Single Mother Households: Evidence From Canadian Provinces," University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers 200510, University of Western Ontario, RBC Financial Group Economic Policy Research Institute. [Downloadable!]
  6. Mette Ejrnaes & Stefan Hochguertel, 2008. "Entrepreneurial Moral Hazard in Income Insurance," Tinbergen Institute Discussion Papers 08-065/3, Tinbergen Institute. [Downloadable!]
  7. Mette Ejrnæs & Gabriel Stefan Hochguertel, 2008. "Entrepreneurial Moral Hazard in Income Insurance: Empirical Evidence from a Large Administrative Sample," CAM Working Papers 2008-02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
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