Estimating the Impact of the Québec’s Work Incentive Program on Labour Supply: An Ex Post Microsimulation Analysis
In 2005, a wage subsidy program was established in Québec to encourage low-income individuals, particularly recipients of social assistance, to work, by offering them fiscal relief. We analyse the effect of this program (the Prime au travail) with a microsimulation model which determines the impact on the labour supply. We estimate the variation in the labour supply at the extensive and intensive margins which allows us to grasp both the income effect and the substitution effect of the Prime au travail on individuals’ willingness to work. On the other hand, our labour supply model has the necessary characteristics to link it to a general equilibrium model and offer an integrated macro-microsimulation analysis. Nonetheless, unlike the usual microsimulation models employed in integrated macro-microsimulation analysis, we provide a number of innovations, notably the analysis at the intensive margin so that it captures both the substitution effect and the income effect. Our results show that a number of individuals entered the labour market in response to the Prime au travail, while others decided to work fewer hours, due to increased income linked to the program. Ultimately, the variation in labour supply was less in the intensive margin than in the extensive margin and it is positive for all types of households, with the exception of female single parents.
|Date of creation:||Jan 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Sherbrooke, Québec, J1K 2R1|
Phone: (819) 821-7233
Fax: (819) 821-6930
Web page: http://www.gredi.org/home/documents-de-travail
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Blundell, Richard & Macurdy, Thomas, 1999.
"Labor supply: A review of alternative approaches,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695
- Paul Gregg & Susan Harkness, 2003. "Welfare Reform and Lone Parents Employment in the UK," The Centre for Market and Public Organisation 03/072, Department of Economics, University of Bristol, UK.
- Heckman, James J & Sedlacek, Guilherme, 1985. "Heterogeneity, Aggregation, and Market Wage Functions: An Empirical Model of Self-selection in the Labor Market," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1077-1125, December.
- Lacroix, Guy, 2009.
"Assessing the Impact of a Wage Subsidy for Single Parents on Social Assistance,"
CLSSRN working papers
clsrn_admin-2009-35, Vancouver School of Economics, revised 22 Jun 2009.
- Guy Lacroix & Dany Brouillette, 2011. "Assessing the impact of a wage subsidy for single parents on social assistance," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1195-1221, November.
- Guy Lacroix, 2010. "Assessing the Impact of a Wage Subsidy for Single Parents on Social Assistance," CIRANO Working Papers 2010s-19, CIRANO.
- Browning, M. & Bourguignon, F. & Chiappori, P.A. & Lechene, V., 1992.
"Incomes and Outcomes: A structural Model of Intra-Household Allocation,"
DELTA Working Papers
92-23, DELTA (Ecole normale supérieure).
- Browning, Martin & Francois Bourguignon & Pierre-Andre Chiappori & Valerie Lechene, 1994. "Income and Outcomes: A Structural Model of Intrahousehold Allocation," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1067-96, December.
- Nada Eissa & Jeffrey B. Liebman, 1996.
"Labor Supply Response to the Earned Income Tax Credit,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 111(2), pages 605-637.
- Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
- 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.
- Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 1063-1114.
- Bruce D. Meyer & Dan T. Rosenbaum, 1999. "Welfare, the Earned Income Tax Credit, and the Labor Supply of Single Mothers," NBER Working Papers 7363, National Bureau of Economic Research, Inc.
- Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
- Scholz, John Karl, 1996. "In-Work Benefits in the United States: The Earned Income Tax Credit," Economic Journal, Royal Economic Society, vol. 106(434), pages 156-69, January.
- Dorothée Boccanfuso & Luc Savard, 2011.
"A segmented labor supply model estimation for the construction of a CGE microsimulation model: An application to the Philippines,"
Cahiers de recherche
11-19, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
- D. Boccanfuso & L. Savard, 2012. "A Segmented Labour Supply Model Estimation for the Construction of a CGE Microsimulation Model: An Application to the Philippines," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 211-234, May.
- Samir Cury & Allexandro Mori Coelho & Isabela Callegari, 2010. "The Impacts of Income Transfer Programs on Income Distribution and Poverty in Brazil: An Integrated Microsimulation and Computable General Equilibrium Analysis," Working Papers MPIA 2010-20, PEP-MPIA.
- Eissa, Nada & Hoynes, Hilary Williamson, 2004. "Taxes and the labor market participation of married couples: the earned income tax credit," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 1931-1958, August.
- Dany Brouillette & Bernard Fortin, 2008. "Impact de la Prime au travail sur l'effort au travail : une approche expérimentale," CIRANO Project Reports 2008rp-01, CIRANO.
- Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
- John Creedy & Guyonne Kalb & Hsein Kew, 2001. "The Melbourne Institute Tax and Transfer Simulator (MITTS)," Melbourne Institute Working Paper Series wp2001n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- 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.
- Andrew Leigh, 2005. "Optimal Design of Earned Income Tax Credits: Evidence from a British Natural Experiment," CEPR Discussion Papers 488, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
- D. Boccanfuso & F. Cabral & F. Cissé & A. Diagne & L. Savard, 2003. "Pauvreté et distribution de revenus au Sénégal: une approche par la modélisation en équilibre général calculable micro-simulé," Cahiers de recherche 0333, CIRPEE.
- Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
When requesting a correction, please mention this item's handle: RePEc:shr:wpaper:13-01. 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: (Luc Savard)
If references are entirely missing, you can add them using this form.