Heterogeneous treatment and self-selection in a wage subsidy experiment

Authors: Brouillette, Dany; Lacroix, Guy
Abstract: The Self-Sufficiency Project (SSP) is a research and demonstration project that offered a generous time-limited income supplement to randomly selected welfare applicants under two conditions. The first, the eligibility condition, required that they remain on welfare for at least 12 months. The second, the qualification condition, required that they find a full-time job within 12 months after establishing eligibility. In this paper we focus on a neglected and important feature of the program, namely that the financial reward for becoming qualified is inversely related to the expected wage rate. Under very simple assumptions we show that those who have a low expected wage rate have a clear incentive to establish eligibility. Empirical non-parametric evidence strongly suggests that individuals self-select into eligibility. We jointly estimate a participation equation and a wage equation that are correlated through individual random effects. Our results show that the omission of self-selectivity into qualification translates into slightly underestimated treatment effects.
Document Type: Article de recherche
Issue Date: 1 August 2010
Open Access Date: Restricted access
Document version: VoR
Permalink: http://hdl.handle.net/20.500.11794/442
This document was published in: Journal of public economics , Vol. 94 (7-8), 479–492 (2010)
Elsevier Science
Alternative version: 10.1016/j.jpubeco.2010.02.006
Collection:Articles publiés dans des revues avec comité de lecture

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