Participation Rates in Government Transfer Programs: Application to Housing Allowances

A general model of participation in a transfer program is developed and applied to data obtained from housing allowance programs in Brown County, Wisconsin and St. Joseph County, Indiana. Estimates of the parameters of the model are obtained from pooled data for the two sites, and the fitted model is used to estimate the equilibrium level of participation and the time required to reach it. The model predicts that the participation rate three years after the housing allowance program's start-40 percent-will rise to a maximum of 51 percent when equilibrium is reached. The model also predicts that 95 percent of the equilibrium level will be reached 5.5 years after the program's start. Although below expectations, the 51 percent equilibrium participation rate is not low compared with other government transfer programs; it is about the same as New York City's welfare and food stamp programs, for example. The model provides valuable insights into the dynamics of government transfer programs. In particular, it shows that the equilibrium participation rate equals the ratio of the rate at which eligible nonparticipants enroll in the program (enrollment rate) to the sum of the enrollment rate and the rate at which participants leave the program (termination rate). If the enrollment and termination rates are equal to each other, as they tend to be in the transfer programs studied, then in equilibrium at a given time only 50 percent of the eligible households will be program participants. The analysis suggests that the most practical way to increase participation is to increase the enrollment rate.