The Impact of the Parental Contribution on the Rate of Participation in Social Assistance: A Natural Experiment Approach .

Abstract

This study evaluates the impact of the parental contribution—introduced during the welfare reform of 1989—on rates of participation in social assistance. From a statistical perspective, this reform allows us to identify a control group comprising single individuals aged 30 and older. Our study groups consist of single persons under 30 subdivided into several age groups. Our empirical approach is based on “difference- in-difference” estimators often applied to natural experiments. This methodology can be generalized to account for other variables which may have differential impacts on the participation rates of the study and the control groups. Our results indicate that the parental contribution reduces the mean participation rate of the 20 and younger cohort by 19.4%. This impact falls to 12.1% for 21 year olds, and becomes insignificant for the over 21 group. In the 20 and younger cohort, the negative effect of the parental contribution considerably mitigates the positive effect of the benefits-scale parity introduced in 1989 for young claimants. Thus, thanks to the parental contribution, an expected increase of 22.0% in the participation rate of that cohort was limited to 3.0%.Natural experiment difference-in-differences social-assistance treatment econometrics program evaluation