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Incentive Effects of Social Assistance: A Regression Discontinuity Approach

  • Milligan, Kevin
  • Lemieux, Thomas

Before 1989, childless social assistance recipients in Quebec under age 30 received much lower benefits than recipients over age 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment. The estimates exhibit little sensitivity to the degree of flexibility in the specification, and perform very well when we control for unobserved heterogeneity using a first difference specification. Finally, we show that commonly used difference-in-differences estimators may perform poorly with inappropriately chosen control groups.

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Paper provided by Statistics Canada, Analytical Studies Branch in its series Analytical Studies Branch Research Paper Series with number 2006280e.

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Date of creation: 14 Jun 2006
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Handle: RePEc:stc:stcp3e:2006280e
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  22. 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.
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