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Caught in the Trap? The Disincentive Effect of Social Assistance

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Author Info
Olivier Bargain (University College Dublin)
Karina Doorley (University College Dublin)

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Abstract

While financial incentives usually have a significant effect on the labor supply of married women and single mothers, the evidence about the participation elasticity of childless singles, and single males especially, is more scant. This is, however, important in countries like France and Germany, where single individuals constitute the core of social assistance recipients. As yet, there is no conclusive evidence about whether, and to what extent, this group is affected by the financial disincentives em- bedded in the generous redistributive programs in place in these countries. In this paper, we exploit a particular feature of the main welfare scheme in France (Revenu Minimum d'Insertion, RMI), namely that childless adults under age 25 are not eligible for it. Using a regression discontinuity approach and the French micro-census data, we find that the RMI reduces the employment of uneducated single men by 7% - 10%. Important policy implications are drawn.

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Publisher Info
Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200906.

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Length: 34 pages
Date of creation: 08 May 2009
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Handle: RePEc:ucn:wpaper:200906

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Related research
Keywords: Regression discontinuity; Welfare; Social assistance; Labor supply;

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Find related papers by JEL classification:
H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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    Other versions:
  5. Gurgand, Marc & Margolis, David N., 2008. "Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum income," Journal of Public Economics, Elsevier, vol. 92(7), pages 1669-1697, July. [Downloadable!] (restricted)
    Other versions:
  6. 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)
  7. Francine D. Blau & Lawrence M. Kahn & FJane Waldfogel, 2004. "The Impact of Welfare Benefits on Single Motherhood and Headship of Young Women: Evidence from the Census," Journal of Human Resources, University of Wisconsin Press, vol. 39(2). [Downloadable!] (restricted)
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  8. Mark R. Rosenzweig, 1999. "Welfare, Marital Prospects, and Nonmarital Childbearing," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages S3-S32, December. [Downloadable!] (restricted)
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  10. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier. [Downloadable!] (restricted)
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  11. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February. [Downloadable!] (restricted)
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  13. 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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  15. Anne Laferrere ; David Le Blanc, 2003. "Gone with the Windfall : How do Housing Allowances Affect Student Co-residence ?," Working Papers 2003-36, Centre de Recherche en Economie et Statistique. [Downloadable!]
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  17. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February. [Downloadable!] (restricted)
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  19. Fougere, Denis & Kramarz, Francis & Magnac, Thierry, 2000. "Youth employment policies in France," European Economic Review, Elsevier, vol. 44(4-6), pages 928-942, May. [Downloadable!] (restricted)
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  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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