In the Self Sufficiency Program (SSP) welfare demonstration, members of a randomly assigned treatment group could receive a subsidy for full time work. The subsidy was available for three 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.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10647.
Length: Date of creation: Jul 2004 Date of revision: Handle: RePEc:nbr:nberwo:10647
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Find related papers by JEL classification: I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Richard Blundell & Hilary W. Hoynes, 2004.
"Has 'In-Work' Benefit Reform Helped the Labor Market?,"
NBER Chapters,
in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 411-460
National Bureau of Economic Research, Inc.
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