Are lone mothers responsive to policy changes? The effects of a Norwegian workfare reform on earnings, education and poverty

Abstract

High welfare dependency and poverty rate among lone mothers prompted a workfare reform of the Norwegian welfare system for lone parents: activity requirements were brought in, time limits imposed and benefit levels raised. To evaluate the reform we introduce an estimator that, unlike the much used difference-in-difference approach, accounts for the fact that policy changes are typically phased in gradually rather than coming into full effect immediately. We find that the reform has not only led to
increased earnings and educational attainment - in the process lowering welfare caseloads and therefore easing the government’s financial burden - but also reduced poverty.