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Debt Relief for the Financially Vulnerable: Impact on Employment, Welfare Receipt, and Mental Health

Author

Listed:
  • de Bruijn, Ernst-Jan

    (Leiden University)

  • Vethaak, Heike

    (University of Leiden)

  • Koning, Pierre

    (Vrije Universiteit Amsterdam)

  • Knoef, Marike

    (Tilburg University)

Abstract

We study the labor market and mental health impacts of debt relief among financially vulnerable individuals. We exploit a cutoff rule used by a Dutch welfare office to determine eligibility to debt relief of welfare debts. We use this cutoff as an instrument in both a fuzzy regression discontinuity and instrumented difference-in-difference design. With administrative data, we estimate economically small and insignificant effects of debt relief on employment, earnings, welfare receipt, and medication use for mental health problems. Subgroup analyses suggest that debt relief increases employment among debtors with larger welfare debts. The larger amount of debt relief for this group has probably a stronger potential to improve their overall debt position.

Suggested Citation

  • de Bruijn, Ernst-Jan & Vethaak, Heike & Koning, Pierre & Knoef, Marike, 2023. "Debt Relief for the Financially Vulnerable: Impact on Employment, Welfare Receipt, and Mental Health," IZA Discussion Papers 16336, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp16336
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    Cited by:

    1. Rabaté, Simon & Tréguier, Julie, 2024. "Labour supply and survivor insurance in the Netherlands," Labour Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    debt relief; welfare debts; welfare recipients; fuzzy regression discontinuity design; instrumented difference-in-difference;
    All these keywords.

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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