Les prestations sociales et l'offre de travail: Y a-t-il une trappe à inactivité?

This paper considers the relevance of the argument that generous welfare payments can induce an "inactivity trap" (where people prefer to remain outside of the labor market, subsisting on transfer payments, than to look for paid employment) using representative data on the French population. We begin by characterizing the population that receives social transfers, in particular the guaranteed minimum income (RMI), and by comparing these people to the population of labor market participants. After briefly describing why one might suspect an inactivity trap, we measure its size by estimating earnings and employment models, and by using the institutional details of the system of taxes and transfers in France in 1996. We then characterize the distribution of the trap, distinguishing between those actually who received welfare in 1995 and the others. We end by estimating a model of work force participation as a function of this measure of the size of the trap. We find that, despite appearances to the contrary that arise in the sample statistics decomposed by observed activitystatus, there is no significant relation between the absence of an expected monetary gain to activity and the realized activity decision.