IDEAS home Printed from https://ideas.repec.org/p/red/sed012/478.html
   My bibliography  Save this paper

Ex-ante and ex-post evaluation of the 1989 French welfare reform using a natural experiment : the 1908 social laws in Alsace-Moselle

Author

Listed:
  • Etienne Wasmer

    (Sciences-Po)

Abstract

We use a combination of ex-ante and ex-post evaluation methods to evaluate a major welfare policy implemented in France in 1989. The policy granted an allowance (the Revenu Minimum d'Insertion, RMI, of up to 45% of the French full time minimum wage) to every individual above age 25 and below a threshold household income. The ex-post evaluation relies on the specificity of the Eastern part of France. In Alsace-Moselle, since 1908 and during German occupancy, residents benefited from a very similar transfer system (called 'Aide Sociale'). Our estimates, based on double and triple differences, show that the RMI policy was associated with: a 3% fall in employment (among unskilled workers 25-55 years old), leading to an estimated loss of 328 000 jobs; a decline in the job-access rate; and a 5-month increase in the average duration of unemployment. We find considerably larger disincentive effects for single parents. In a second step, we build and calibrate a matching model with endogenous job search effort, using the difference-in-differences estimates. It predicts that, if a 38% implicit tax rate had been maintained as in the 2007 reform (RSA), instead of a 100% implicit tax rate due to the RMI, the increase in unemployment would have been approximately half of its actual value, and the increase in the duration of unemployment would have been limited to only 2.5 months.

Suggested Citation

  • Etienne Wasmer, 2012. "Ex-ante and ex-post evaluation of the 1989 French welfare reform using a natural experiment : the 1908 social laws in Alsace-Moselle," 2012 Meeting Papers 478, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:478
    as

    Download full text from publisher

    File URL: https://economicdynamics.org/meetpapers/2012/paper_478.pdf
    Download Restriction: no

    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. Flinn, Christopher J & Heckman, James J, 1983. "Are Unemployment and Out of the Labor Force Behaviorally Distinct Labor Force States?," Journal of Labor Economics, University of Chicago Press, vol. 1(1), pages 28-42, January.
    3. Matthieu Chemin & Etienne Wasmer, 2009. "Using Alsace-Moselle Local Laws to Build a Difference-in-Differences Estimation Strategy of the Employment Effects of the 35-Hour Workweek Regulation in France," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 487-524, October.
    4. Stephen R. G. Jones & W. Craig Riddell, 1999. "The Measurement of Unemployment: An Empirical Approach," Econometrica, Econometric Society, vol. 67(1), pages 147-162, January.
    5. Denis Fougère & Laurence Rioux, 2001. "Le RMI treize ans après : entre redistribution et incitations," Économie et Statistique, Programme National Persée, vol. 346(1), pages 3-12.
    6. Pietro Garibaldi & Etienne Wasmer, 2005. "Equilibrium Search Unemployment, Endogenous Participation, And Labor Market Flows," Journal of the European Economic Association, MIT Press, vol. 3(4), pages 851-882, June.
    7. 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.
    8. repec:spo:wpecon:info:hdl:2441/8921 is not listed on IDEAS
    9. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    10. Lee, David S., 2008. "Randomized experiments from non-random selection in U.S. House elections," Journal of Econometrics, Elsevier, vol. 142(2), pages 675-697, February.
    11. Bruno Crepon & Francis Kramarz, 2002. "Employed 40 Hours or Not Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1355-1389, December.
    12. Terracol, Antoine, 2009. "Guaranteed minimum income and unemployment duration in France," Labour Economics, Elsevier, vol. 16(2), pages 171-182, April.
    13. Yannick L'Horty & Antoine Parent, 1999. "La revalorisation du RMI," Revue Économique, Programme National Persée, vol. 50(3), pages 465-478.
    14. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Doris, Aedin & O'Neill, Donal & Sweetman, Olive, 2017. "Does Reducing Unemployment Benefits During a Recession Reduce Youth Unemployment? Evidence from a 50% Cut in Unemployment Assistance," IZA Discussion Papers 10727, Institute for the Study of Labor (IZA).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:red:sed012:478. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann). General contact details of provider: http://edirc.repec.org/data/sedddea.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.