Working Paper: NBER ID: w10541
Authors: Thomas Lemieux; Kevin Milligan
Abstract: We examine the incentive effects of transfer programs using a unique policy episode. Prior to 1989, social assistance recipients without children in Quebec who were under age 30 received benefits 60 percent lower than recipients older than 30. We use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes and on living arrangements using a regression discontinuity approach. We find strong evidence that more generous social assistance benefits reduce employment, and more suggestive evidence that they affect marital status and living arrangements. The regression discontinuity 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-difference estimators may perform poorly when control groups are inappropriately chosen.
Keywords: Social Assistance; Labor Market Outcomes; Regression Discontinuity
JEL Codes: H3; I3; J21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher benefits (J32) | influence marital status and living arrangements (J12) |
| more generous social assistance benefits (H53) | reduce employment among men without children (J79) |
| increase in benefits (H55) | drop in employment rates at age 30 (J63) |
| higher benefits (J32) | individuals less likely to participate in the labor force (J21) |