Distributional Impacts of the Self-Sufficiency Project

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 onobservational studies conducted with large survey-sample data sets, a second makes use of datagenerated by experimental evaluations of changes to means-tested programs. Much of the overallliterature has focused on mean impacts. In this paper, we use random-assignment experimentaldata from Canada?s Self-Sufficiency Project (SSP) to look at impacts of this unique reform onthe distributions of income, earnings, and transfers. SSP offered members of the treatment groupa generous subsidy for working full time. Quantile treatment effect (QTE) estimates show therewas considerable heterogeneity in the impacts of SSP on the distributions of earnings, transfers,and total income; heterogeneity that would be missed by looking only at average treatmenteffects. Moreover, these heterogeneous impacts are consistent with the predictions of laborsupply theory. During the period when the subsidy is available, the SSP impact on the earningsdistribution is zero for the bottom half of the distribution. The SSP earnings distribution is higherfor much of the upper third of the distribution except at the very top, where the earningsdistribution is the same under either program or possibly lower under SSP. Further, during theperiod when SSP receipt was possible, the impacts on the distributions of transfer payments (IAplus the subsidy) and total income (earnings plus transfers) are also different at different pointsof the distribution. In particular, positive impacts on the transfer distribution are concentrated atthe lower end of the transfer distribution while positive impacts on the income distribution areconcentrated in the upper end of the income distribution. Impacts of SSP on these distributionswere essentially zero after the subsidy was no longer available