The Duration of Housing Allowance Claims and Labour Market Disincentives: The Norwegian Case

Abstract

Housing allowances in Norway are meant to enable low-income households to increase, or maintain, their housing consumption. In order to identify low-income households and to ensure a desirable vertical equity, the allowances decrease as income rises. The marginal withdrawal of housing allowances as income increases is quite high. Interacting with the tax system this might potentially produce a dependency culture and a depressing effect on the supply of labour.A dependency culture would yield long spells as recipients of housing allowances. This paper demonstrates that this is not the case for single parents and families with children. Around 30 per cent of the receivers from these groups drop out of the system every year. Furthermore the hazards (probability of dropping out) seem to be independent of the length of the claim.