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Incentive Effects of Social Assistance: A Regression Discontinuity Approach

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Listed:
  • Lemieux, Thomas
  • Milligan, Kevin

Abstract

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.

Suggested Citation

  • Lemieux, Thomas & Milligan, Kevin, 2006. "Incentive Effects of Social Assistance: A Regression Discontinuity Approach," Analytical Studies Branch Research Paper Series 2006280e, Statistics Canada, Analytical Studies Branch.
  • Handle: RePEc:stc:stcp3e:2006280e
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    References listed on IDEAS

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    More about this item

    Keywords

    Employment insurance; social assistance and other transfers; Income; pensions; spending and wealth; Labour; Low income and inequality;

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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