Do workfare participants recover quickly from retrenchment?
What happens to participants in a workfare program--a program that imposes work requirements on welfare recipients--when that program is cut? The authors compare the incomes of workfare participants in Argentina to those of nonparticipants and past participants after a severe contraction in aggregate outlays on the program. The authors find evidence of partial income replacement, such that those who left the program were able to make up one quarter of the gross workfare wage within six months. This rises to half in 12 months. The estimates are unbiased in the presence of time-invariant errors from mismatching in the selection of the comparison group. Fully removing selection bias would probably yield even lower income replacement. Test results based on a second follow-up survey that valid inferences can be drawn about program impacts from the authors'measures of income replacement.
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