How to reduce poverty among lone mothers? The effects of generous welfare and in-work benefits

Chiara Pronzato, Dondena (Bocconi University)

Lone mothers are overrepresented among poor people in many European countries, with worrying consequences for themselves and their children. Also in Norway, which is known as a country of economic and welfare success, lone mothers are at least three times more likely to be poor than married mothers with children in the same age-range. In 1998, a welfare reform increased the amount of benefits and introduced working requirements. Using a quasi-experimental evaluation approach (Mogstad and Pronzato, 2008), we find a positive effect of the reform on lone mothers’ labour supply but a negligible negative one on their poverty status. In this paper, we estimate a static structural model of labour supply, which may be used as an alternative method of policy evaluation and allows us to derive the policy parameters which minimize poverty among lone mothers.