The effect of transfer payments on the labor supply of single mothers

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 the 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 following the enactment of the law the labor supply of uneducated single mothers fell by about 10%, due to a decrease in the employment rate and working hours. However, from an economic perspective, the effect of the Law on the labor supply of single mothers is not very significant.