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Experiments and Natural Experiments

1012 a single mother before wftc b single mother after

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Unformatted text preview: available to all working lone parents and to couples in which both partners work more than sixteen hours per week.6 The requirement that both parents work helps to offset the negative incentive to work on the second worker in a couple implicit in the family-based calculation of the level of the credit in both the WFTC. We return to the importance of this adverse effect on couples in our detailed discussion of the WFTC reform in section 10.5. It is also important for the EITC and reoccurs in our discussion of the EITC reforms in section 10.4. 10.3.3 The Impact on Work Incentives In the previous discussion the importance of interactions of in-work be6 . This is not included in the calculation of the budget constraint figures because the takeup of child care credits has been rather low. As we point out in section 10.5, recent figures of t ake-up under WFTC show it to have remained low but increasing quite rapidly. Fortin – Econ 560 Lecture 1C C. Regression Discontinuity Designs Lemieux and Milligan (2008) exploit the fact that before 1989, childless social assistance recipients in Quebec under age 30 received much lower benefits than recipients over age 30. They use this sharp discontinuity in policy to estimate the effects of social assistance on various labour market outcomes using a regression discontinuity approach and find strong evidence that more generous social assistance benefits reduce employment. Fortin – Econ 560 Lecture 1C The estimating equation is Yia 0 1Treat ia ( age ) ia , where Yia is an outcome variable for individual i of age a. The effect of age on the outcome variable is captured by the function (age) and { Treat ia 0 if age 30, 1 if age 30 is a treatment dummy that captures higher social assistance benefits at age 30. Because of data limitations (in terms of actual age and timing of outcomes), the authors use an estimation equation that compensates for these problems. The RD estimator is based on the assumption that people close to the discontinuity are similar. Key identification assumption that underlies the regression discontinuity (RD) strategy is that δ(.) is a smooth (continuous) function. This is a “sharp” RD design since the treatment variable is a deterministic function of the assignment variable (age). Sample selection : males with less than high school education without children living with them Fortin – Econ 560 Lecture 1C Two reasons why the assumption that δ(.) is continuous at age 30 may be violated. o Some people could find ways to falsify their age. If such manipulations were possible, people claiming to be age 30 could be systematically different from those aged 29. o Because the authors select men without dependent children for the analysis, endogenous fertility and living arrangements decisions could generate nonrandom selection. ARTICLE IN PRESS T. Lemieux, K. Milligan / Journal of Econometrics 142 (2008) 807–828 817 0.65 0.63 0.61 Employment rate 0.59 0.57 0.55 0.53 0.51 0.49 - - - : Actual regression fit 0.47 : "Predicted" fit Confidence b...
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