The Effect of Transfer Payments on the Labor Supply of Single Mothers
By Noam Zussman
Research Department, Bank of Israel
Roni Frish
Research Department, Bank of Israel
The Single Parent Family Law came into effect in Israel in 1992. It increased the income maintenance allowance paid to single mothers who have little or no income. In order to identify the effect of this legislative change on labor supply of single mothers the study uses a unique panel containing rich socioeconomic data. Applying a variety of econometric methods (difference-in-differences, panel regressions and Propensity Score Matching),the study found that the employment rate and wages among uneducated divorced single mothers, or those living in the periphery, rose at a slower pace than among similar married mothers.