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Does welfare reduce poverty?

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  • Borjas, George J.

Abstract

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 made fundamental changes in the federal system of public assistance in the United States, and specifically limited the eligibility of immigrant households to receive many types of aid. Many states chose to protect their immigrant populations from the presumed adverse effects of welfare reform by offering state-funded assistance to these groups. I exploit these changes in eligibility rules to examine the link between welfare and poverty rates in the immigrant population. My empirical analysis documents that the welfare cutbacks did not increase poverty rates. The immigrant families most affected by welfare reform responded by substantially increasing their labor supply, thereby raising their family income and slightly lowering their poverty rate. In the targeted immigrant population, therefore, welfare does not reduce poverty; it may actually increase it.

Suggested Citation

  • Borjas, George J., 2016. "Does welfare reduce poverty?," Research in Economics, Elsevier, vol. 70(1), pages 143-157.
    • Handle: RePEc:eee:reecon:v:70:y:2016:i:1:p:143-157
    DOI: 10.1016/j.rie.2015.11.002
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    References listed on IDEAS

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    1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
    2. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2002. "The Impact of Welfare Reform on Living Arrangements," NBER Working Papers 8784, National Bureau of Economic Research, Inc.
    3. Borjas, George J., 2004. "Food insecurity and public assistance," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1421-1443, July.
    4. Schoeni, R.F. & Blank, R.M., 2000. "What Has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure," Papers 00-02, RAND - Labor and Population Program.
    5. George J. Borjas & Lynette Hilton, 1996. "Immigration and the Welfare State: Immigrant Participation in Means-Tested Entitlement Programs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 575-604.
    6. Krueger, Alan B. & Meyer, Bruce D., 2002. "Labor supply effects of social insurance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 33, pages 2327-2392, Elsevier.
    7. Schoeni, R.F. & Blank, R.M., 2000. "What Has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure," Papers 00-02, RAND - Labor and Population Program.
    8. Robert A. Moffitt, 1999. "The Effect of Pre-PRWORA Waivers on AFDC Caseloads and Female Earnings, Income, and Labor Force Behavior," JCPR Working Papers 89, Northwestern University/University of Chicago Joint Center for Poverty Research.
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    Cited by:

    1. Keita, Sekou & Mandon, Pierre, 2018. "Give a fish or teach fishing? Partisan affiliation of U.S. governors and the poverty status of immigrants," European Journal of Political Economy, Elsevier, vol. 55(C), pages 65-96.

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