Canadian welfare reform and the importance of entry

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.