Should student employment be subsidized? Conditional counterfactuals and the outcomes of work-study participation

Student employment subsidies are one of the largest types of federal employment subsidies, yet little is known about their impact. We provide a framework highlighting the likelihood of heterogeneity in program effects, depending upon whether recipients are marginal or inframarginal workers. We then utilize a matching approach to estimate the effects of the Federal Work-Study program, leveraging the fact that FWS funding varies across institutions for idiosyncratic reasons. Our results suggest that about half of FWS participants would have worked even in the absence of the subsidy; for these students, FWS reduces hours worked and improves academic outcomes, but has little impact on early post-college employment. For students who would not have worked otherwise, the pattern of effects reverses. Overall, the positive effects are strongest for subgroups who are the least likely to have access to the program, suggesting there may be gains to improved targeting of funds.