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

Author

Listed:
  • Marc Gurgand

    (PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • David Margolis

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

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.

Suggested Citation

  • Marc Gurgand & David Margolis, 2008. "Does Work Pay in France? Monetary Incentives, Hours Constraints and the Guaranteed Minimum Income," Post-Print halshs-00202299, HAL.
    • Handle: RePEc:hal:journl:halshs-00202299
    DOI: 10.1016/j.jpubeco.2007.10.008
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00202299
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. BARGAIN Olivier & DOORLEY Karina, 2009. "Caught in the Trap? The Disincentive Effect of Social Assistance," IRISS Working Paper Series 2009-10, IRISS at CEPS/INSTEAD.
    2. Pierre Cahuc & Stéphane Carcillo & Ulf Rinne & Klaus Zimmermann, 2013. "Youth unemployment in old Europe: the polar cases of France and Germany," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-23, December.
    3. Olivier Bargain & Karina Doorley, 2016. "The Effect of Social Benefits on Youth Employment: Combining RD and a Behavioral Model," Post-Print hal-03894917, HAL.
    4. Kenza Elass, 2022. "The multiple dimensions of selection into employment," AMSE Working Papers 2219, Aix-Marseille School of Economics, France.
    5. George J. Borjas & Anthony Edo, 2021. "Gender, Selection into Employment, and the Wage Impact of Immigration," NBER Working Papers 28682, National Bureau of Economic Research, Inc.
    6. Bargain, Olivier B. & Doorley, Karina, 2013. "Putting Structure on the RD Design: Social Transfers and Youth Inactivity in France," IZA Discussion Papers 7508, Institute of Labor Economics (IZA).
    7. Jérôme Gautié & David Margolis, 2009. "Introduction," Économie et Statistique, Programme National Persée, vol. 429(1), pages 3-19.
    8. Elass, Kenza, 2024. "Male and female selection effects on gender wage gaps in three countries," Labour Economics, Elsevier, vol. 87(C).
    9. Terracol, Antoine, 2009. "Guaranteed minimum income and unemployment duration in France," Labour Economics, Elsevier, vol. 16(2), pages 171-182, April.
    10. Rolf Aaberge & Ugo Colombino, 2014. "Labour Supply Models," Contributions to Economic Analysis, in: Handbook of Microsimulation Modelling, volume 127, pages 167-221, Emerald Group Publishing Limited.
    11. Blundell, Richard & Bozio, Antoine & Laroque, Guy, 2011. "Extensive and Intensive Margins of Labour Supply: Working Hours in the US, UK and France," IZA Discussion Papers 6051, Institute of Labor Economics (IZA).
    12. Michaël Sicsic, 2018. "Financial Incentives to Work in France between 1998 and 2014," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 503-504, pages 13-35.
    13. Kenza Elass, 2022. "The multiple dimensions of selection into employment," French Stata Users' Group Meetings 2022 06, Stata Users Group.
    14. Kenza Elass, 2022. "The multiple dimensions of selection into employment," Working Papers hal-03788508, HAL.

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    Keywords

    Welfare; labor earnings; transfers; tax-system;
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