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

Author

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  • Bargain, Olivier

    () (University of Bordeaux)

  • Doorley, Karina

    () (Economic and Social Research Institute, Dublin)

Abstract

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 analysis of alternative policy situations. However, their internal validity is often questioned. In this paper, we suggest combining the two approaches by putting structure on a regression discontinuity (RD) design. The RD estimation exploits the fact that childless single individuals under 25 years of age are not eligible for social assistance in France. The behavioral model is identified by the discontinuity and by an additional exclusion restriction on the form of financial incentives to work. We investigate the performance of the behavioral model for predictions further away from the threshold, check external validity and use the model to predict important counterfactual policies, including the extension of social assistance to young people and the role of in-work benefit components.

Suggested Citation

  • Bargain, Olivier & Doorley, Karina, 2013. "Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France," IZA Discussion Papers 7508, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp7508
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    1. repec:eme:ceapzz:s0573-855520140000293006 is not listed on IDEAS
    2. Pierre Cahuc & Stéphane Carcillo & Ulf Rinne & Klaus Zimmermann, 2013. "Youth unemployment in old Europe: the polar cases of France and Germany," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    3. Luciano Canova & Luca Piccoli & Amedeo Spadaro, 2015. "An ex ante evaluation of the Revenu de Solidarité Active by micro–macro simulation techniques," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-20, December.
    4. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis,in: Handbook of Microsimulation Modelling, volume 127, pages 167-221 Emerald Publishing Ltd.

    More about this item

    Keywords

    regression discontinuity; behavioral model; labor supply;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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