Does Work Pay in France? Monetary Incentives and the Guaranteed Minimum Income (original) (raw)
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Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum income
Journal of Public Economics, 2008
This paper uses a representative sample of individuals on France's main welfare program (the Revenu Minimum d'Insertion, or RMI) to estimate monetary incentives for employment among welfare recipients. Based on the estimated joint distribution of wages and hours potentially oered to each individual, we compute potential gains from working in a very detailed manner. Relating these gains to observed employment, we then estimate a simple structural labor supply model. We nd that potential gains are almost always positive but very small on average, especially for single mothers, because of the high implicit marginal tax rates embedded in the system. Employment rates are sensitive to incentives with extensive margin elasticities for both men and women usually below one. Conditional on these elasticities, simulations indicate that existing policies devoted to reducing marginal tax rates at the bottom of the income distribution, such as the intéressement earnings top-up program, have little impact in this population due to their very limited scope. The recently introduced negative income tax (Prime pour l'emploi), seems to be an exception.
Sciences Po publications, 2012
We use a combination of ex-ante and ex-post evaluation methods to evaluate a major welfare policy implemented in France in 1989. The policy granted an allowance (the Revenu Minimum d'Insertion, RMI, of up to 45% of the French full time minimum wage) to every individual above age 25 and below a threshold household income. The ex-post evaluation relies on the specificity of the Eastern part of France. In Alsace-Moselle, since 1908 and during German occupancy, residents benefited from a very similar transfer system (called 'Aide Sociale'). Our estimates, based on double and triple differences, show that the RMI policy was associated with: a 3% fall in employment (among unskilled workers 25-55 years old), leading to an estimated loss of 328 000 jobs; a decline in the job-access rate; and a 5-month increase in the average duration of unemployment. We find considerably larger disincentive effects for single parents. In a second step, we build and calibrate a matching model wit...
Distributional Effects of Social Security Reforms: the Case of France
RePEc: Research Papers in Economics, 2015
This paper assesses the impact of two social security reforms using a calibrated, dynamic life cycle model. It quantifies the long-run distributional impact of two sets of reforms in France: (1) the 2013 reform of Prime Minister Ayrault, which modified the parameters of a defined benefit (DB) plan, and (2) a hypothetical reform that changes the system to a notional defined contribution (NDC) plan, similar to that in Italy. First, on aggregate welfare, the Ayrault reform and the hypothetical switch to NDC yield contrasting results. The Ayrault reform improves aggregate welfare, which is not the case for the NDC reform. Welfare comparisons are made with respect to the "benchmark economy," where increases in life expectancy occur and are dealt with only through a higher contribution rate. Second, both reforms yield unequal distributions of welfare changes, with low-skill workers on the losing end. Under the Ayrault reform, low-skill workers delay retirement by two years, to age 62. Under NDC reform, pensions for lowskill workers fall substantially as inequalities during the work life translate directly into inequalities in pensions. The switch to an NDC scheme leads to a more unequal society in terms of asset and welfare distribution. Résumé. Les effets redistributifs des réformes de retraite: le cas de la France. Cet article utilise un modèle de cycle de vie dynamique calibré pour quantifier l'impact distributif à long terme de deux réformes du système de retraite en France: (1) la réforme Ayrault de 2013, qui modifie les paramètres d'un système à prestations déterminées (PD); (2) un passage hypothétique à un système de comptes notionnels à cotisation déterminé (NDC), comme en Italie. Tout d'abord, les deux réformes donnent lieu à des résultats opposés en terme de bien-être aggrégé. La réforme Ayrault améliore le bien-être total, ce qui n'est pas de la réforme NDC. Les comparaisons de bien-être sont effectuées par rapport à une économie de référence caractérisée par une hausse de l'espérance de vie et des taux de cotisation. De plus, les réformes donnent lieu à des distributions inégales du bien-être, avec les travaileurs peu qualifiés dans la queue de distribution. En effet, la réforme Ayrault les contraint à travailler deux années supplémentaires, jusqu'à l'âge de 62 ans. Le système NDC conduit à une réduction marquée des pensions de retraite, en
A note on the relation between income and welfare
This notes shows how intertemporal and cross-section welfare are related in a general class of stochastic continuous time models. In the steady state intertemporal welfare is shown to be proportional to cross-sectional income. This result holds for economies where each agent maximizes his own expected discounted utility. That is, we do not assume that aggregate utility is maximized. We provide an application to search in the labor market and one to pollution externalities.
Economics Bulletin, 2009
The short-time compensation (STC) program aims at avoiding redundancies in case of strong short-term downturns. In the literature, STC is an instrument of both job security and flexibility. This paper investigates the impact of worksharing on STC in France. The form of worksharing examined in this study is the reduction of the standard or contractual hours worked per week to 35 hours in France. We quantify the average decrease in the STC recourse with difference-indifferences estimators assessed on a balanced panel of French establishments. We highlight a substitution effect between STC and worksharing due to their internal flexibility role. As a consequence, STC seems to be less used as a flexibility device and the worksharing policy would refocus STC on its employment protection role. Acknowledgements: This paper is a prolongation of a project financed by the Statistical Department of the French Labour Ministry (DARES). All remaining errors and shortcomings remain our own. Data availability: Final panel data is available on request from the authors and the initial databases can be requested from the institutions which produce them.
The aim of this paper is to suggest an economic modeling of labor force participation microeconomic decisions in an inter-temporal framework characterized by the occurrence of a basic incomes/minimum wage scheme. We use the observed probabilities of transitions between different kind of jobs on the French labor market, for different categories of workers (age, sex, skills etc.), and the observed incomes associated to each kind of job, to identify the categories of workers that face inactivity or poverty trap problems. The results show (i) the occurrence of important inequalities between workers concerning the "inter-temporal" return of work and, consequently, the incentive to work, (ii) no obvious link between the occurrence of a static trap (work does not pay in the short run) and incentive to work problems. Moreover the results stress that unskilled male workers do have interest to accept jobs that do not pay, while skilled male workers do not have interest to accept jobs that do pay.
Guaranteed minimum income and unemployment duration in France
Labour Economics, 2009
In this article, we use data from the European Community Household Panel to evaluate the impact of a French guaranteed income program, the RMI, on the the hazard out of unemployment. Self-selection into the program is corrected using a multivariate duration model developed by Abbring and van den Berg (2003). We find that RMI receipt has a strong negative impact during the first months of program participation, but that this disincentive effect quickly falls to insignificant levels after six months. Household structure also appears to be an important determinant of the importance of the adverse effect of program participation.
An equalization of opportunities for income acquisition in France
Theory of equality of opportunity considers that people should not be held responsible for circumstances whereas they should bear the responsibility of their effort. In the first part of the paper we draw nonparametric stochastic dominance tests on the 5 waves of the French household survey "Budget des Familles" from 1979 to 2000 to compare the income distributions conditional on circumstances defined by the occupational group of the father of the respondent. The methodology amounts to compare return and risk of lotteries of different social backgrounds. In the second part we analyse the previous results with several decompositions of the return and of the risk of lotteries. In the last part of the paper we try to measure the share of inequality of opportunity in the inequality of outcomes. The analysis demonstrates a slight weakening of inequality of opportunity, translating in two phenomena: sons of more privileged backgrounds loose ground, and sons of non-wage earners i...
An Earnings Treatment Effects Approach
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Traditional welfare analyses based on money income needs to be broadened by its time dimension. In the course of time the traditional full-time work is diminishing and new labour arrangements are discussed (keyword: flexible labour markets). Our study is contributing to economic well-being by adding insights into particular work effort characteristics-the daily timing of work and its fragmentation-and its resulting income distribution. With our focus on 'who is working when within a day with which earnings consequences' we go beyond traditional labour market analyses with its working time division into aggregated full and part time work, working hours spread across a week and weekend, life time working etc. Whereas the first part of our study is describing the distribution of timing and fragmentation of daily work time and its resulting income based on more than 35.000 diaries of the recent German Time Budget S urvey 2001/2002, the second part of our study quantifies determinants of arrangement specific earnings functions detecting significant explanatory pattern of what is behind. The economic theory behind is a human capital approach in a market and non-market context, extended by non-market time use, the partner's working condition, social networking as well as household and regional characteristics. The econometrics use a treatment effects type interdependent estimation of endogenous participation (selection) in a daily working hour pattern (self-selection)and pattern specific earnings function explanation. The overall result: Individual earnings in Germany are dependent on and significant different with regard to the daily working hour arrangement capturing timing and fragmentation of work time. Market and non-market factors are important and significant in explaining earnings.