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Are lone mothers responsive to policy changes? The effects of a Norwegian workfare reform on earnings, education and poverty

Number: 8
Year: 2008
Author(s): Magne Mogstad, Chiara Pronzato
Keywords: welfare,lone mothers,workfare reform,difference-in-difference,activity requirements,time limits,earnings,education,poverty
The generous Nordic model of welfare is commonly viewed as an exceptional success, in terms of both equality and economic growth. However, it recently became evident that subgroups of the population with weak labour market attachment and high welfare dependency, such as lone mothers, were vastly overrepresented among the poor. This prompted a workfare reform of the Norwegian welfare system for lone mothers: activity requirements were brought in, time limits imposed and benefit levels raised. To evaluate the reform we introduce an estimator that, unlike the much used difference-in-difference approach, accounts for the fact that policy changes are typically phased in gradually rather than coming into full effect immediately. The results were striking: the workfare reform has not only led to increased earnings and educational attainment but also reduced poverty.

Magne Mogstad

Statistics Norway, Research Department

 

Chiara Pronzato

Universita Bocconi, Dondena Centre for Research on Social Dynamics

 

 

Keywords: welfare, lone mothers, workfare reform, difference-in-difference, activity requirements, time limits, earnings, education, poverty

 

Download: The paper may be downloaded here.