Welfare benefits and the duration of welfare spells:: Evidence from a natural experiment in Canada

This paper proposes an evaluation of some effects of the reform of the welfare program that took place in the Province of Quebec in August 1989. This reform abolished the discrimination based on age that applied to the benefits single individuals and childless couples below the age of 30 were entitled to. With the reform, their monthly benefits increased by 88 % for singles and by 145 % for childless couples. Nonparametric analysis shows that the only transition rates which were affected, at least temporarily, by the reform were the rates of exit from the welfare state. The estimation of a flexible duration model with time-varying covariates such as the welfare benefits, the minimum wage rate and the local unemployment rate, shows that the reform increased the expected duration on welfare from 2 to 4.5 months for eligible recipients.