Would Financial Incentives for Leaving Welfare Lead Some People to Stay on Welfare Longer?: An Experimental Evaluation of ?Entry Effects? In the Self-Sufficiency Project

Abstract

The self-sufficiency Project (SSP) is a large-scale social experiment being conducted in Canada to evaluate the effects of an earnings supplement (or subsidy) for long-term welfare recipients who find a full-time job and leave income assistance. The supplement is available to single parents who have received income assistance for a year or more, and typically doubles the gross take-home pay of recipients. An important concern is whether the availability of the supplement would lead some new income assistance recipients to prolong their stay on welfare in order to gain eligibility. A separate experiment was conducted with new welfare recipients to measure the magnitude of this effect. One half of a group of new recipients were informed that would be eligible to receive SSP if they stayed on income assistance for a year; the other half were randomly assigned to a control group. Our analysis indicates a very modest ?delayed exit? effect among the treatment group relative to the controls.

JEL Classification: J 1