RT Journal Article
SR Electronic
T1 The Effect of Social Benefits on Youth Employment
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 1032
OP 1059
DO 10.3368/jhr.52.4.1115-7510R
VO 52
IS 4
A1 Bargain, Olivier
A1 Doorley, Karina
YR 2017
UL http://jhr.uwpress.org/content/52/4/1032.abstract
AB Natural experiments provide robust identifying assumptions for the estimation of policy effects. Yet their use for policy design is often limited by the difficulty of extrapolating on the basis of reduced-form estimates. In this study, we exploit an age condition in the eligibility for social assistance in France, which lends itself to a regression discontinuity (RD) design. We suggest making the underlying labor supply model explicit—that is, translating the reduced-form discontinuity in terms of discontinuous changes in disposable incomes. This exercise shows the potential of combining natural experiments and behavioral models. In particular, we can test the external validity of the combined approach. We find that it predicts the effect of a subsequent reform, which extends transfers to the working poor, remarkably well. The model is then used to simulate the extension of social assistance to young people and finds that a transfer program with an in-work component would not create further disincentives to work in this population.