Conference Paper BHPS Research Conference
Are Lone Mothers Responsive to Policy Changes? The Effects of a Norwegian Workfare Reform on Earnings, Education and Poverty
07 Jul 2007
This study evaluates a Norwegian single parent benefit reform, in which work and educational requirements were introduced, time limits imposed, and the maximum benefit level increased. We propose to identify the impact of the reform by taking the difference between a pre-reform difference-in-difference estimator and a post-reform difference-in-difference estimator of the effects of becoming single mother on earnings, education, and poverty. This estimator will, unlike the commonly applied difference-in-difference estimator, capture the effects of policy changes when the institutional setup involves a phase-in period from the time a reform is introduced to it is fully implemented. The main findings of this study are that the reform had an overall positive effect on earnings as well as on education of single mothers. Furthermore, we find that the reform led to remarkable decrease in poverty, especially for single mothers with young children. This was driven both by increased earnings and higher benefit amounts. Our findings also demonstrate substantial heterogeneity in the responses of single mothers to the reform by age and educational level. Altogether, the results from this paper undermine the argument in favour of generous out-of-work benefits to support individuals prone to poverty, rather than encouraging self-sufficiency by strengthening the incentives to work and undertake education.