Does Work Pay in France? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: 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 offered to each individual, we compute potential gains from working in a very detailedmanner. Relating these gains to observed employment, we then estimate a simple structural labor supply model. We find 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 elasticitiesfor 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.

Keywords: Welfare; labor earnings; transfers; tax-system (search for similar items in EconPapers)
Date: 2008-07
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00202299v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Published in Journal of Public Economics, 2008, 92 (7), pp.1669-1697. ⟨10.1016/j.jpubeco.2007.10.008⟩

Downloads: (external link)
https://shs.hal.science/halshs-00202299v1/document (application/pdf)

Related works:
Journal Article: Does work pay in France? Monetary incentives, hours constraints, and the guaranteed minimum income (2008)
Working Paper: Does Work Pay in France? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income (2008)
Working Paper: Does Work Pay in France? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:halshs-00202299

DOI: 10.1016/j.jpubeco.2007.10.008

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().