Does Work Pay in France ? Monetary Incentives and and the Guaranteed Minimum Income

Marc Gurgand and David Margolis

No 2004-34, Working Papers from Center for Research in Economics and Statistics

Abstract: Most welfare programs generate high marginal tax rates on labor income.This paper uses a representative sample of individuals on France's mainwelfare program (the Revenu Minimum d'Insertion, or RMI) to estimatemonetary gains to employment for welfare recipients. This is based on thedistribution of potential monthly earnings faced by each individual, as in-ferred from the distribution of observed wages and working time. Takingaccount of the welfare earnings top-up program (int¶eressement), we ¯ndthat gains are almost always positive, but that their amount is very low,especially for single mothers. Int¶eressement is found to have a small impact,because of its provisional nature. Gains are positively related to the prob-ability that a welfare recipient in 1996 will be observed in employment in1998. Using a simple structural model, we interpret this as a labor supplye®ect.

Date: 2004
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