Labor Supply Responses to the Norwegian Housing Allowance

Abstract

In 2009 low-income individuals without children became eligible to obtain housing allowance. This thesis examines how the reform affected their labor supply. Applying a differences-in-differences framework to administrative data, the labor supply responses are estimated by comparing individuals with and without children. The estimated treatment effect on labor force participation and average labor income shows a significant reduction in labor supply, but further analysis indicates that these should not be interpreted as causal. I find that a countervailing effect on social benefits undermined the expected change in work incentives for the treatment group, and robustness tests indicate that the identifying assumption underlying the estimated labor supply responses do not hold.