Distributional Impacts of the Self-Sufficiency Project
Published in: NBER Working Paper No. W11626, Sep. 2005, p. 1-52
Posted on RAND.org on December 31, 2004
A large literature has been concerned with the impacts of recent welfare reforms on income, earnings, transfers, and labor-force attachment. While one strand of this literature relies on observational studies conducted with large survey-sample data sets, a second makes use of data generated by experimental evaluations of changes to means-tested programs. Much of the overall literature has focused on mean impacts. In this paper, the authors use random-assignment experimental data from Canada's Self-Sufficiency Project (SSP) to look at impacts of this unique reform on the distributions of income, earnings, and transfers. SSP offered members of the treatment group a generous subsidy for working full time. Quantile Treatment Effect (QTE) estimates show there was considerable heterogeneity in the impacts of SSP on earnings, transfers, and total income across the distribution; heterogeneity that would be missed by looking only at average treatment effects. Moreover, these heterogeneous impacts are consistent with the predictions of static labor supply theory. During the period when the subsidy is available, SSP impacts on earnings are zero for the bottom half of the earnings distribution. For much of the upper third of the distribution, earnings are higher under SSP except at the very top, where earnings are the same under either program or possibly lower under SSP. Further, during the SSP receipt period, the impacts on transfer payments (1A plus the subsidy) and total income (earnings plus transfers) are also quite varied. In particular positive impacts on transfers are concentrated at the lower end of the transfer distribution while positive impacts on income are concentrated in the upper end of the income distribution. Impacts of SSP were essentially zero after the subsidy was no longer available.