When income effects are large: labor supply responses and the value of welfare transfers

Giulia Giupponi

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: I estimate the long-run income effect of welfare transfers on individual labor supply. Using Italian administrative data on the universe of survivor insurance recipients, I implement a regression discontinuity design around a change in survivor insurance generosity based on the spouse's death date. I find that survivors fully offset the benefit loss with increases in earnings. Labor force participation and program substitution are the main margins of adjustment. I consider potential explanations for the large income effect. Evidence suggests that the value of additional income in the widowhood state is large, driving large participation responses to survivor benefit cuts.

Keywords: income effect; labor supply; valuation of welfare transfers (search for similar items in EconPapers)
JEL-codes: H55 I38 J22 (search for similar items in EconPapers)
Date: 2019-10-01
New Economics Papers: this item is included in nep-ias, nep-lma, nep-pbe and nep-pub
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Citations: View citations in EconPapers (30)

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