May 2006

IZA DP No. 2122: An Econometric Analysis of the Impact of the Self-Sufficiency Project on the Employment Behaviour of Former Welfare Recipients

The Self-Sufficiency Project (SSP) was a Canadian research and demonstration project that attempted to “make work pay” for long-term income assistance (IA) recipients by supplementing their earnings. The long-term goal of SSP was to get lone parents permanently off IA and into the paid labour force. The purpose of this study is to evaluate the impact of SSP on employment and non-employment durations and its overall effect on employment rates. We focus on generating estimates of the “effect of the treatment on the treated” (TOT) where the “treated” are those in the program group who qualified for the earnings supplement by finding a full-time job during the qualifying period (a group we call the “take-up” group). To obtain a consistent estimate of TOT we follow the work of Ham and LaLonde (1996) and Eberwein, Ham and Lalonde (1997) in estimating a joint model of non-employment and employment durations that controls for unobserved heterogeneity and non-random selection into work and into the take-up group. We find evidence of significant impacts of SSP on non-employment and employment durations. Simulation results show a TOT on the employment rate at 52 months after baseline of approximately 4 percentage points; a 10 percent increase compared to the control group. Further, this estimate of TOT using the results from our econometric model is 5 percentage points higher than the estimate from the raw data.