IDEAS home Printed from https://ideas.repec.org/a/eee/econom/v142y2008i2p807-828.html
   My bibliography  Save this article

Incentive effects of social assistance: A regression discontinuity approach

Author

Listed:
  • Lemieux, Thomas
  • Milligan, Kevin

Abstract

We examine the incentive effects of transfer programs using a unique policy episode. Prior to 1989, social assistance recipients without children in Quebec who were under age 30 received benefits 60 percent lower than recipients older than 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes and on living arrangements using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment, and more suggestive evidence that they affect marital status and living arrangements. The regression discontinuity 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-difference estimators may perform poorly when control groups are inappropriately chosen.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.
    • Handle: RePEc:eee:econom:v:142:y:2008:i:2:p:807-828
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0304-4076(07)00118-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    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.
    2. 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.
    3. Martin D. Dooley & Stéphane Gascon & Pierre Lefebvre & Philip Merrigan, 2000. "Lone Female Headship and Welfare Policy in Canada," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 587-602.
    4. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 577-599.
    5. Robert A. Moffitt, 2003. "The Temporary Assistance for Needy Families Program," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 291-364, National Bureau of Economic Research, Inc.
    6. Martin D. Dooley, 1999. "The Evolution of Welfare Participation Among Canadian Lone Mothers From 1973-1991," Canadian Journal of Economics, Canadian Economics Association, vol. 32(3), pages 589-612, May.
    7. 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.
    8. Murphy, Kevin M & Welch, Finis, 1990. "Empirical Age-Earnings Profiles," Journal of Labor Economics, University of Chicago Press, vol. 8(2), pages 202-229, April.
    9. 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.
    10. Wei-Yin Hu, 2001. "Welfare and Family Stability: Do Benefits Affect When Children Leave the Nest?," Journal of Human Resources, University of Wisconsin Press, vol. 36(2), pages 274-303.
    11. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2005. "Welfare Reform and Health," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    12. Jacob A. Mincer, 1974. "Introduction to "Schooling, Experience, and Earnings"," NBER Chapters, in: Schooling, Experience, and Earnings, pages 1-4, National Bureau of Economic Research, Inc.
    13. Kapsalis, Costa, 2001. "An Assessment of EI and SA Reporting in SLID," Analytical Studies Branch Research Paper Series 2001166e, Statistics Canada, Analytical Studies Branch.
    14. Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.
    15. Jacob A. Mincer, 1974. "Schooling, Experience, and Earnings," NBER Books, National Bureau of Economic Research, Inc, number minc74-1, March.
    16. Wilbert van der Klaauw, 2002. "Estimating the Effect of Financial Aid Offers on College Enrollment: A Regression-Discontinuity Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1249-1287, November.
    17. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2006. "Welfare Reform and Children's Living Arrangements," Journal of Human Resources, University of Wisconsin Press, vol. 41(1).
    18. Justin McCrary, 2007. "Manipulation of the Running Variable in the Regression Discontinuity Design: A Density Test," NBER Technical Working Papers 0334, National Bureau of Economic Research, Inc.
    19. Robert A. Moffitt, 2003. "Means-Tested Transfer Programs in the United States," NBER Books, National Bureau of Economic Research, Inc, number moff03-1, March.
    20. 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.
    21. Moffitt, Robert A., 2002. "Welfare programs and labor supply," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 34, pages 2393-2430, Elsevier.
    22. Olivier Blanchard, 2004. "The Economic Future of Europe," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 3-26, Fall.
    23. Lee, David S. & Card, David, 2008. "Regression discontinuity inference with specification error," Journal of Econometrics, Elsevier, vol. 142(2), pages 655-674, February.
    24. 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.
    25. 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.
    26. 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, August.
    27. 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 201-209, January.
    28. Green, David A. & Warburton, William P., 2004. "Tightening a welfare system: the effects of benefit denial on future welfare receipt," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1471-1493, July.
    29. Black, Dan A. & McKinnish, Terra G. & Sanders, Seth G., 2003. "Does the availability of high-wage jobs for low-skilled men affect welfare expenditures? Evidence from shocks to the steel and coal industries," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 1921-1942, September.
    30. Jacob A. Mincer, 1974. "Schooling and Earnings," NBER Chapters, in: Schooling, Experience, and Earnings, pages 41-63, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.
    2. Bargain, Olivier & Doorley, Karina, 2009. "Caught in the Trap? The Disincentive Effect of Social Assistance," IZA Discussion Papers 4291, Institute of Labor Economics (IZA).
    3. Berg, Nathan & Gabel, Todd, 2010. "New Reform Strategies and Welfare Participation in Canada," MPRA Paper 26591, University Library of Munich, Germany.
    4. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    5. Feng, Andy & Graetz, Georg, 2017. "A question of degree: The effects of degree class on labor market outcomes," Economics of Education Review, Elsevier, vol. 61(C), pages 140-161.
    6. Francesconi, Marco & Van Der Klaauw, Wilbert & Rainer, Helmut, 2008. "Unintended Consequences of Welfare Reform: The Case of Divorced Parents," CEPR Discussion Papers 7107, C.E.P.R. Discussion Papers.
    7. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    8. Charles L. Baum & Christopher J. Ruhm, 2016. "The Changing Benefits of Early Work Experience," Southern Economic Journal, John Wiley & Sons, vol. 83(2), pages 343-363, October.
    9. Mauricio Villamizar‐Villegas & Freddy A. Pinzon‐Puerto & Maria Alejandra Ruiz‐Sanchez, 2022. "A comprehensive history of regression discontinuity designs: An empirical survey of the last 60 years," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1130-1178, September.
    10. van der Klaauw, Bas, 2014. "From micro data to causality: Forty years of empirical labor economics," Labour Economics, Elsevier, vol. 30(C), pages 88-97.
    11. Bergolo, M. & Cruces, G., 2021. "The anatomy of behavioral responses to social assistance when informal employment is high," Journal of Public Economics, Elsevier, vol. 193(C).
    12. Arthur Charpentier & Emmanuel Flachaire & Antoine Ly, 2017. "Econom\'etrie et Machine Learning," Papers 1708.06992, arXiv.org, revised Mar 2018.
    13. Christophe J. NORDMAN & François-Charles WOLFF, 2012. "On-The-Job Learning And Earnings: Comparative Evidence From Morocco And Senegal," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 35, pages 151-176.
    14. Lalive, Rafael, 2008. "How do extended benefits affect unemployment duration A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 785-806, February.
    15. Meng, Lingsheng, 2013. "Evaluating China's poverty alleviation program: A regression discontinuity approach," Journal of Public Economics, Elsevier, vol. 101(C), pages 1-11.
    16. Córdoba, Juan Carlos & Ripoll, Marla, 2013. "What explains schooling differences across countries?," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 184-202.
    17. Wilson Nicholas, 2019. "The World’s Oldest Profession? Employment-Age Profiles from the Transactional Sex Market," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-17, June.
    18. John DiNardo & David S. Lee, 2010. "Program Evaluation and Research Designs," Working Papers 1228, Princeton University, Department of Economics, Industrial Relations Section..
    19. Bauer, Thomas K. & Bender, Stefan & Paloyo, Alfredo R. & Schmidt, Christoph M., 2012. "Evaluating the labor-market effects of compulsory military service," European Economic Review, Elsevier, vol. 56(4), pages 814-829.
    20. repec:lan:wpaper:4408 is not listed on IDEAS
    21. Marcos Chamon & João Manoel Pinho de Mello & Sergio Firpo, 2008. "Electoral rules, political competition and fiscal spending : regression discontinuity evidence from Brazilian municipalities," Textos para discussão 559, Department of Economics PUC-Rio (Brazil).

    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:econom:v:142:y:2008:i:2:p:807-828. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jeconom .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.