NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incentive Effects of Social Assistance: A Regression Discontinuity Approach

Thomas Lemieux, Kevin Milligan

NBER Working Paper No. 10541
Issued in June 2004
NBER Program(s):   LS   PE

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.

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Document Object Identifier (DOI): 10.3386/w10541

Published: 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. citation courtesy of

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