Government transfers may indirectly reduce the income of the poor. Transfers recipients may work less. Transfers may promote the formation of female-headed households. The major public assistance programs are income-tested. An income-tested program is one in which the amount of the transfer falls as the recipient's net income increases.
T is the transfer and NI is net household income.
The food stamp program gives households food coupons that are accepted as payment by grocery stores for food purchased. Housing assistance provides assistance to the poor through public housing and through Housing Assistance Payments. In the public housing program, the government subsidizes the construction and operation of housing units owned and operated by local public housing authorities. Earning from more work will cause the transfer to fall because of the transfer reduction rate, causing the individual to work less. Effect of Transfers on Family Composition.