Incentive Effects of Social Assistance: A Regression Discontinuity Approach

This paper from the National Bureau for Economic Research (NBER) uses a Regression Discontinuity approach to analyse the effects of transfer programs on labor market outcomes and living arrangements.

"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. [The authors] 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. [They] 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 [they] control for unobserved heterogeneity using a first difference specification. Finally, [they] show that commonly used difference-in-difference estimators may perform poorly when control groups are inappropriately chosen." (Lemieux & Milligan, 2004)

Contents

• Social assistance in Quebec and Canada
• Data description and Descriptive Statistics
• Empirical Approach
• Cross-sectional age profiles
• Regression Discontinuity Estimates
• Comparing RD and Difference-in-Differences results
• Conclusions