Caught in the Trap? The Disincentive Effect of Social Assistance

34 Pages Posted: 21 Jul 2009

See all articles by Olivier Bargain

Olivier Bargain

IZA Institute of Labor Economics; University College Dublin (UCD)

Karina Doorley

University College Dublin (UCD)

Abstract

While financial incentives usually have a significant effect on the labor supply of married women and single mothers, the evidence about the participation elasticity of childless singles, and single males especially, is more scant. This is, however, important in countries like France and Germany, where single individuals constitute the core of social assistance recipients. As yet, there is no conclusive evidence about whether, and to what extent, this group is affected by the financial disincentives embedded in the generous redistributive programs in place in these countries. In this paper, we exploit a particular feature of the main welfare scheme in France (Revenu Minimum d'Insertion, RMI), namely that childless adults under age 25 are not eligible for it. Using a regression discontinuity approach and the French micro-census data, we find that the RMI reduces the employment of uneducated single men by 7%-10%. Important policy implications are drawn.

Keywords: regression discontinuity, welfare, social assistance, labor supply

JEL Classification: H52, J21

Suggested Citation

Bargain, Olivier and Doorley, Karina, Caught in the Trap? The Disincentive Effect of Social Assistance. IZA Discussion Paper No. 4291, Available at SSRN: https://ssrn.com/abstract=1434625

Olivier Bargain (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland
+353 1 716 8357 (Phone)
+353 1 283 0068 (Fax)

HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm

Karina Doorley

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

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