Incentive Effects of Social Assistance: A Regression Discontinuity Approach

Thomas Lemieux and Kevin Milligan

No 10541, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: H3 I3 (search for similar items in EconPapers)
Date: 2004-06
Note: LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

Published as Lemieux, Thomas & Milligan, Kevin, 2008. "Incentive effects of social assistance: A regression discontinuity approach," Journal of Econometrics, Elsevier, vol. 142(2), pages 807-828, February.

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Journal Article: Incentive effects of social assistance: A regression discontinuity approach (2008)
Working Paper: Incentive Effects of Social Assistance: A Regression Discontinuity Approach (2006)
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