Subsidized Vehicle Acquisition and Earned Income in the Transition from Welfare to Work

Abstract

Availability and affordability of reliable transportation – either through public transportation or individual ownership of automobiles – appears necessary to support a successful transition from welfare to work. One approach adopted by state and local governments is to subsidize vehicle acquisition by welfare recipients in transition. To date there are no empirical studies that analyze the impacts or effectiveness of these vehicle subsidy programs. The objective of this study is to examine the extent to which participation in a small-scale vehicle donation-and-sales program in Vermont increases earned income by individuals in transition from welfare to work. Using reduced-form random effects and censored regression models to account for the simultaneity of decisions to work and participate in welfare programs, we examine the impacts of this vehicle acquisition program for a small group of individuals. Our analyses indicate that the program results in a statistically significant increase in both earned income and the probability of employment.