The Effects of Housing Allowance Benefit Levels on Recipient Duration: Evidence from the Swedish 1997 Reform

Abstract

How the duration of housing allowance spells varies with the generosity of the housing allowance system carries important policy implications. In 1997, the Swedish housing allowance system implemented a drastic reform which substantially affected claimants who were couples with children in terms of their financial incentives to utilise housing allowance benefits. However, at the same time, the 1997 reform largely left single-parent claimants unaffected. Exploiting the quasi-experimental feature of this reform, this paper analyses the impacts of benefit shrinkage on couple-with-children recipients' exit hazards using the DD (difference-in-difference) estimation strategy. Careful attention is given to measuring interaction effects appropriately in non-linear models. The findings in this paper suggest that the 1997 reform led to a sharp increase in the leaving speed of the recipients in the `couples with children' category.

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