Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 22/2014: The Effect of Welfare Reforms on Benefit Substitution.

Katrine Holm Reiso ()
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Katrine Holm Reiso: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: Policy-makers have confronted welfare dependence and poverty among single mothers by imposing work requirements and time limits on the receipt of welfare benefits. Reforms with such features have generally reduced programme case-loads and increased the employment and earnings of single mothers. There is little evidence, however, on the amount of benefit substitution associated with such reforms. In this paper, we test whether reductions in welfare dependence may be offset by increased participation in other benefit programmes. Evaluating the restrictive reforms of the welfare programme for single mothers in Norway, we find evidence of considerable benefit substitution. Hence, decreases in programme case-loads do not reflect equal reductions in welfare dependence.

Keywords: Welfare reform; welfare dependence; benefit substitution; single mothers.

JEL-codes: H55; I38

43 pages, June 30, 2014

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