Take-up and non-take-up of the “prime d’activité”: a well-being assessment

Résumé 0

In this paper, we study the French “ prime d’activité,” an income support instrument for the working poor, using a microeconomic model of trade-offs between consumption and “leisure.” We propose a method for calibrating this model. Our modelling shows that the “prime” would encourage workers to seek part-time jobs, even for relatively high hourly wages. It also shows that the gains from using the “prime,” when well-being evaluated, would be strongly decreasing as a function of the hours worked. We assess some of the modelling risk by highlighting the consequences of interindividual heterogeneity in subsistence consumption and (low) wealth holding. Overall, our modelling suggests that this low income support instrument would significantly reduce “inactivity traps” but would not target well workers with low hourly earnings; it would also tend to produce non-take-up because, when they are small, monetary gains would bring only limited additional well-being gains. JEL Codes: D11, D60, H55, I30, J20.