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

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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.

Published: Card, David and Philip K. Robins. "How Important Are 'Entry Effects' In Financial Incentive Programs For Welfare Recipients? Experimental Evidence From The Self-Sufficiency Project," Journal of Econometrics, 2005, v125(1-2,Mar-Apr), 113-139.

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