Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers
AbstractIn the Self Sufficiency Project (SSP) welfare demonstration, members of a randomly assigned treatment group could receive a subsidy for full-time work. The subsidy was available for 3 years, but only to people who began working full time within 12 months of random assignment. A simple optimizing model suggests that the eligibility rules created an "establishment" incentive to find a job and leave welfare within a year of random assignment, and an "entitlement" incentive to choose work over welfare once eligibility was established. Building on this insight, we develop an econometric model of welfare participation that allows us to separate the two effects and estimate the impact of the earnings subsidy on welfare entry and exit rates among those who achieved eligibility. The combination of the two incentives explains the time profile of the experimental impacts, which peaked 15 months after random assignment and faded relatively quickly. Our findings suggest that about half of the peak impact of SSP was attributable to the establishment incentive. Despite the extra work effort generated by SSP, the program had no lasting impact on wages and little or no long-run effect on welfare participation. Copyright The Econometric Society 2005.
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Bibliographic InfoArticle provided by Econometric Society in its journal Econometrica.
Volume (Year): 73 (2005)
Issue (Month): 6 (November)
Other versions of this item:
- David Card & Dean R. Hyslop, 2004. "Estimating the Effects of a Time Limited Earnings Subsidy for Welfare Leavers," NBER Working Papers 10647, National Bureau of Economic Research, Inc.
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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