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The Demand for Welfare Generosity

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  • David C. Ribar
  • Mark O. Wilhelm

Abstract

This paper estimates economic models of the determinants of state benefit levels in the Aid to Families with Dependent Children (AFDC) program using 1969–1992 data. These models have been extensively researched; however, the existing literature has produced an unacceptably wide range of estimates. Using alternative econometric procedures, this paper systematically examines both the specification assumptions underlying previous analyses as well as several additional specification issues. It is, therefore, able to replicate and reconcile estimates from previous studies and to provide updated, consensus estimates of the demand for welfare generosity. It finds that changes in the average level of income within states have small but statistically significant positive effects on benefits with the confidence bounds on the elasticity extending from 0.11 to 0.82. Changes in the effective price of redistribution are found to have, at most, weak negative effects with elasticities in the range of -0.14 to 0.02. These results are used to evaluate the effects of block grant provisions in the recently enacted welfare reform legislation. © 1999 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 81 (1999)
Issue (Month): 1 (February)
Pages: 96-108

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Handle: RePEc:tpr:restat:v:81:y:1999:i:1:p:96-108

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Cited by:
  1. Howard Chernick, 1998. "Fiscal Effects of Block Grants for the Needy: An Interpretation of the Evidence," International Tax and Public Finance, Springer, Springer, vol. 5(2), pages 205-233, May.
  2. James Marton & David E. Wildasin, 2006. "State Government Cash and In-kind Benefits: Intergovernmental Fiscal Transfers and Cross-Program Substitution," Working Papers, University of Kentucky, Institute for Federalism and Intergovernmental Relations 2006-01, University of Kentucky, Institute for Federalism and Intergovernmental Relations.
  3. Allers, Maarten A. & Toolsema, Linda A., 2012. "Welfare financing: Grant allocation and efficiency," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 12004-EEF, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  4. Howard Chernick, 1999. "State Fiscal Substitution Between the Federal Food Stamp Program and AFDC, Medicaid, and SSI," JCPR Working Papers, Northwestern University/University of Chicago Joint Center for Poverty Research 123, Northwestern University/University of Chicago Joint Center for Poverty Research.
  5. Robert Moffitt, 2001. "The Temporary Assistance for Needy Families Program," Economics Working Paper Archive, The Johns Hopkins University,Department of Economics 463, The Johns Hopkins University,Department of Economics.
  6. Robert Moffitt, 1999. "Explaining Welfare Reform: Public Choice and the Labor Market," International Tax and Public Finance, Springer, Springer, vol. 6(3), pages 289-315, August.
  7. Moffitt, Robert & Ribar, David & Wilhelm, Mark, 1998. "The decline of welfare benefits in the U.S.: the role of wage inequality," Journal of Public Economics, Elsevier, Elsevier, vol. 68(3), pages 421-452, June.
  8. Linda Toolsema & Maarten Allers, 2014. "Welfare Financing: Grant Allocation and Efficiency," De Economist, Springer, Springer, vol. 162(2), pages 147-166, June.
  9. Francine D. Blau & Lawrence M. Kahn & Jane Waldfogel, 2002. "The Impact of Welfare Benefits on Single Motherhood and Headship of Young Women: Evidence from the Census," NBER Working Papers 9338, National Bureau of Economic Research, Inc.
  10. Stichnoth, Holger & van der Straeten, Karine, 2009. "Ethnic diversity and attitudes towards redistribution: a review of the literature," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 09-036, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. Katherine Baicker, 2001. "Extensive or Intensive Generosity? The Price and Income Effects of Federal Grants," NBER Working Papers 8384, National Bureau of Economic Research, Inc.
  12. Fiva, Jon H. & Rattso, Jorn, 2006. "Welfare competition in Norway: Norms and expenditures," European Journal of Political Economy, Elsevier, Elsevier, vol. 22(1), pages 202-222, March.

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