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Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State

  • Mogstad, Magne


    (University of Chicago)

  • Pronzato, Chiara D.


    (University of Turin)

There is a heated debate in many European countries about a move towards a welfare system that increases the incentives for lone mothers to move off welfare and into work. We analyze the consequences of a major Norwegian workfare reform of the generous welfare system for lone mothers. Our difference-in-differences estimates show that the policy changes were successful in improving labor market attachment and increasing disposable income of new lone mothers. By contrast, the reform led to a substantial decrease in disposable income and a significant increase in poverty among persistent lone mothers, because a sizeable group was unable to offset the loss of out-of-work welfare benefits with gains in earnings. This suggests that the desired effects of the workfare reform were associated with the side-effects of income loss and increased poverty among a substantial number of lone mothers with insurmountable employment barriers. This finding stands in stark contrast to evidence from similar policy changes in Canada, the UK, and the US, and underscores that policymakers from other developed countries should be cautious when drawing lessons from the successful welfare reforms implemented in Anglo-Saxon countries.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4489.

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Length: 30 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: Scandinavian Journal of Economics, 2012, 114 (4), 1129–1159
Handle: RePEc:iza:izadps:dp4489
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  1. 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.
  2. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  3. Bruce D. Meyer & Dan T. Rosenbaum, 1998. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," JCPR Working Papers 32, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Richard Burkhauser & Greg Duncan & Richard Hauser & Roland Berntsen, 1991. "Wife or frau, women do worse: A comparison of men and women in the United States and Germany after marital dissolution," Demography, Springer, vol. 28(3), pages 353-360, August.
  5. Christopher A. Swann, 2004. "Welfare Reform when Recipients are Forward-Looking," Department of Economics Working Papers 04-04, Stony Brook University, Department of Economics.
  6. Eissa, Nada & Liebman, Jeffrey B, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, MIT Press, vol. 111(2), pages 605-37, May.
  7. V. Joseph Hotz & Charles H. Mullin & John Karl Scholz, 2002. "Welfare, Employment, and Income: Evidence on the Effects of Benefit Reductions from California," American Economic Review, American Economic Association, vol. 92(2), pages 380-384, May.
  8. 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.
  9. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
  10. John F. Ermisch & Robert E. Wright, 1991. "Welfare Benefits and Lone Parents' Employment in Great Britain," Journal of Human Resources, University of Wisconsin Press, vol. 26(3), pages 424-456.
  11. Randi Kjeldstad & Marit R�nsen, 2004. "Welfare Rules, Business Cycles, And Employment Dynamics Among Lone Parents In Norway," Feminist Economics, Taylor & Francis Journals, vol. 10(2), pages 61-89.
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