Putting Structure on the Rd Design: Social Transfers and Youth Inactivity in France

42 Pages Posted: 23 Aug 2013

See all articles by Olivier Bargain

Olivier Bargain

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

Karina Doorley

University College Dublin (UCD)

Abstract

Natural experiments provide explicit and robust identifying assumptions for the estimation of treatment effects. Yet their use for policy design is often limited by the difficulty in extrapolating on the basis of reduced-form estimates of policy effects. On the contrary, structural models allow us to conduct ex ante analysis of alternative policy situations. However, their internal validity is often questioned.In this paper, we suggest combining the two approaches by putting structure on a regression discontinuity (RD) design. The RD estimation exploits the fact that childless single individuals under 25 years of age are not eligible for social assistance in France. The behavioral model is identified by the discontinuity and by an additional exclusion restriction on the form of financial incentives to work. We investigate the performance of the behavioral model for predictions further away from the threshold, check external validity and use the model to predict important counterfactual policies, including the extension of social assistance to young people and the role of in-work benefit components.

Keywords: behavioral model, regression discontinuity, labor supply

JEL Classification: C52, H31, J22

Suggested Citation

Bargain, Olivier and Doorley, Karina, Putting Structure on the Rd Design: Social Transfers and Youth Inactivity in France. IZA Discussion Paper No. 7508, Available at SSRN: https://ssrn.com/abstract=2314803

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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