Financial Incentives for Increasing Work and Income Among Low-Income Families

64 Pages Posted: 1 Apr 1999 Last revised: 12 Oct 2010

See all articles by Rebecca M. Blank

Rebecca M. Blank

U.S. Department of Commerce

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Philip K. Robins

University of Miami - School of Business Administration - Department of Economics

Date Written: March 1999

Abstract

This paper investigates the impact of financial incentive programs, which have become an increasingly common component of welfare programs. We review experimental evidence from several such programs. Financial incentive programs appear to increase work and raise income (lower poverty), but cost somewhat more than alternative welfare programs. In particular, windfall beneficiaries -- those who would have been working anyway -- can raise costs by participating in the program. Several existing programs limit this effect by targeting long-term welfare recipients or by limiting benefits to full-time workers. At the same time, because financial incentive programs transfer support to working low-income families, the increase in costs due to windfall beneficiaries makes these programs more effective at alleviating poverty and raising incomes. Evidence also indicates that combining financial incentive programs with job search and job support services can increase both employment and income gains. Non-experimental evidence from the Earned Income Tax Credit (EITC) and from state Temporary Assistance to Needy Families (TANF) programs with enhanced earnings disregards also suggests that these programs increase employment, and this evidence is consistent with the experimental evidence on the impact of financial incentive programs.

Suggested Citation

Blank, Rebecca M. and Card, David E. and Robins, Philip K., Financial Incentives for Increasing Work and Income Among Low-Income Families (March 1999). NBER Working Paper No. w6998. Available at SSRN: https://ssrn.com/abstract=154692

Rebecca M. Blank (Contact Author)

U.S. Department of Commerce ( email )

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David E. Card

University of California, Berkeley - Department of Economics ( email )

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Institute for the Study of Labor (IZA)

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National Bureau of Economic Research (NBER)

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Philip K. Robins

University of Miami - School of Business Administration - Department of Economics ( email )

P.O. Box 248126
Coral Gables, FL 33124-6550
United States
305-284-5664 (Phone)
305-284-2985 (Fax)

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