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Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project

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  • David Card
  • Philip K. Robins

Abstract

This paper reports on a randomized evaluation of an earnings subsidy offered to long-term welfare recipients in Canada. The program -- known as the Self-Sufficiency Project (SSP) -- provides a supplement equal to one-half of the difference between a target earnings level and a participant's actual earnings. The SSP supplement is similar to a negative income tax with two important differences: (1) eligibility is limited to long-term welfare recipients who find a full-time job; and (2) the payment depends on individual earnings rather than family income. Our evaluation is based on a classical randomized design: one half of a group of single parents who had been on welfare for over a year were eligible to receive the SSP supplement, while the other half were assigned to a control group. Results for an early cohort of SSP participants and controls suggest that the financial incentives of the Self-Sufficiency Program increase labor market attachment and reduce welfare participation.

Suggested Citation

  • David Card & Philip K. Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project," NBER Working Papers 5701, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5701
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    References listed on IDEAS

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    1. Rebecca M. Blank & Maria J. Hanratty, 1993. "Responding to Need: A Comparison of Social Safety Nets in Canada and the United States," NBER Chapters,in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 191-232 National Bureau of Economic Research, Inc.
    2. Saul D. Hoffman & Laurence S. Seidman, 1990. "The Earned Income Tax Credit," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number eitc, November.
    3. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    4. Lemieux, Thomas & Fortin, Bernard & Frechette, Pierre, 1994. "The Effect of Taxes on Labor Supply in the Underground Economy," American Economic Review, American Economic Association, vol. 84(1), pages 231-254, March.
    5. Philip K. Robins, 1985. "A Comparison of the Labor Supply Findings from the Four Negative Income Tax Experiments," Journal of Human Resources, University of Wisconsin Press, vol. 20(4), pages 567-582.
    6. Kesselman, J.R. & Riddell, W.C., 1991. "Assessment of Alternative Subsidy Treatments for the EIC Self-Sufficiency Project," Papers r-95-5, Gouvernement du Canada - Human Resources Development.
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    Citations

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    Cited by:

    1. Peter Haan & Victoria Prowse & Arne Uhlendorff, 2008. "Employment effects of welfare reforms: Evidence from a dynamic structural life-cycle model," PSE Working Papers halshs-00586748, HAL.
    2. Stepan Jurajda & Daniel M??nich, 2002. "Understanding Czech Long-Term Unemployment," William Davidson Institute Working Papers Series 498, William Davidson Institute at the University of Michigan.
    3. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low- Income Families," HEW 9902002, EconWPA.
    4. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    5. Philip K Robins & Charles Michalopoulos & Elsie Pan, 2001. "Financial incentives and welfare reform in the United States," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(1), pages 129-150.
    6. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
    7. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 339-360, August.
    8. Philip K. Robins & Charles Michalopoulos, 2001. "Using financial incentives to encourage welfare recipients to become economically self-sufficient," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 105-123.
    9. Mekonnen, Tigist, 2017. "Financing rural households and its impact: Evidence from randomized field experiment data," MERIT Working Papers 009, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Primoz Dolenc & Milan Vodopivec, 2005. "Does work pay in Slovenia?," Financial Theory and Practice, Institute of Public Finance, vol. 29(4), pages 341-362.

    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

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