TITLE An exit policy from public assistance and work incentives (in Japanese with English summary)
AUTHOR Michio Yuda

Associate Professor, Graduate School of Economics and Management, Tohoku University


Although the Japanese public assistance system includes various direct and indirect employment support programs, they have not achieved sufficient success in promoting employment and selfreliance among recipients. One of the primary reasons is that the imposition of a high marginal tax rate on wage earnings suppresses work incentives for the recipients and leads to a net decrease in disposable income by taxation immediately after exiting the program. To address the latter issue, The Entitlement Program for Employment and Independence (EPEI) was introduced in 2014 as a new public employment support policy, specifically focusing on facilitating the transition from public assistance. This paper aims to estimate the effect of the EPEI on the work incentives of the recipients, utilizing individual panel data encompassing all households receiving public assistance benefits. Employing the difference-in-differences framework, I find that the EPEI significantly enhances the labor participation rate of women in single-person households and contributes to the transition out of public assistance for single-mother households. These findings indicate that additional employment support programs implemented within the existing system have a meaningful impact on a limited number of specific households, particularly when the existing system already contains mechanisms that discourage work incentives for the target population.

KEYWORDS public assistance system, work incentive, difference-in-differences, Japan
ISSUED May 2023

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