Canadian welfare reform and the importance of entry

Abstract

ABSTRACT Since 1993, many Canadian provinces reformed their welfare systems with the twin goals of reducing costs and increasing the self-sufficiency of its participants. Different classifications of these policies are presented, and a welfare reform policy bundle is proposed. Using a novel dynamic panel model approach, which accommodates for past participation in driving future participation choices, it is found that welfare reform reduced participation rates by about 0.7% points (or about 10.3% relative to the unconditional mean rate of participation). This effect size is smaller than those reported in studies using static models, suggesting welfare reform may have previously gained additional ‘credit’ for reducing welfare caseloads by absorbing the effect of prior nonparticipation. Using a set of transition models, it is then shown that these declines in participation were achieved by reducing the probability of welfare entry.