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Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France

  • Olivier Bargain

    ()

    (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales (EHESS) - Ecole Centrale Marseille (ECM), IZA - Institute for the Study of Labor)

  • Karina Doorley

    (IZA - Institute for the Study of Labor, CEPS/INSTEAD - CEPS/INSTEAD)

Natural experiments provide explicit and robust identifying assumptions for the estimation of treatment effects. Yet their use for policy design is often limited by the difficulty in extrapolating on the basis of reduced-form estimates of policy effects. On the contrary, structural models allow us to conduct ex ante policy analysis but their internal validity is often questioned. In this paper, we suggest combining the two approaches by putting structure on a regression discontinuity (RD) design. We start with a RD estimation, exploiting the fact that childless single individuals under 25 years of age are not eligible for social assistance in France. A behavioral model is then identified using the same age discontinuity. While this model replicates well the employment effect obtained by RD, it can also be used to predict actual policy reforms and, hence, to check external validity. Showing good performances in this regard, it is finally used to simulate important counterfactual policies, namely the extension of social assistance to young people and the employment effects of a large in-work benefit reform.

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Paper provided by HAL in its series Working Papers with number halshs-00967329.

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Date of creation: Feb 2014
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Handle: RePEc:hal:wpaper:halshs-00967329
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  1. David S. Lee & Thomas Lemieux, 2009. "Regression Discontinuity Designs in Economics," NBER Working Papers 14723, National Bureau of Economic Research, Inc.
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  11. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  12. Magali Beffy & Moshe Buchinsky & Denis Fougère & Thierry Kamionka & Francis Kramarz, 2006. "The Returns to Seniority in France (and Why are They Lower than in the United States ?)," Working Papers 2006-05, Centre de Recherche en Economie et Statistique.
  13. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
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  16. Marc Gurgand & David Margolis, 2008. "Does Work Pay in France? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00202299, HAL.
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  24. Richard Blundell, 2012. "Tax Policy Reform: The Role Of Empirical Evidence," Journal of the European Economic Association, European Economic Association, vol. 10(1), pages 43-77, 02.
  25. 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.
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  27. Guido W. Imbens & Donald B. Rubin & Bruce I. Sacerdote, 2001. "Estimating the Effect of Unearned Income on Labor Earnings, Savings, and Consumption: Evidence from a Survey of Lottery Players," American Economic Review, American Economic Association, vol. 91(4), pages 778-794, September.
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