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Making work pay for the indebted? Assessing the effects of debt services on welfare recipients

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  • Koning, Pierre

Abstract

This paper investigates the effects of an intervention that was targeted at a specific group of Dutch Social Assistance (SA) recipients with debt problems. Since a large share of the income gains of work resumption is earmarked for creditors, these individuals generally experienced a strong a priori disincentive to resume formal work. The intervention had three aims: restructuring personal debts, preventing the occurrence of new debt problems, and increasing the direct incentives to resume work. The paper uses the Timing-of-Events method to identify the effects of debt programs on SA spells. Our main finding is that the debt program substantially increased the exit out of the SA schemes, but this was mainly due to exits out of the labor force. With a large share of assigned individuals who did not participate in the scheme, it appears that individuals perceived or experienced the program as unpleasant and opted to exit without work. Our results suggest the presence of threat effects, particularly for individuals who were assigned by their caseworkers but did not participate in the debt program.

Suggested Citation

  • Koning, Pierre, 2015. "Making work pay for the indebted? Assessing the effects of debt services on welfare recipients," Labour Economics, Elsevier, vol. 34(C), pages 152-161.
    • Handle: RePEc:eee:labeco:v:34:y:2015:i:c:p:152-161
    DOI: 10.1016/j.labeco.2015.03.003
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    Cited by:

    1. Hernæs, Øystein M., 2020. "Distributional effects of welfare reform for young adults: An unconditional quantile regression approach," Labour Economics, Elsevier, vol. 65(C).

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    More about this item

    Keywords

    Debt services; Program evaluation; Threat effects;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • K35 - Law and Economics - - Other Substantive Areas of Law - - - Personal Bankruptcy Law

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