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Welfare Dynamics under Time Limits

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  • Jeffrey Grogger
  • Charles Michalopoulos

Abstract

Among the most important changes brought about by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 are time limits, which provide consumers with an incentive to conserve their welfare benefits for future use. Among forward-looking, expected-utility-maximizing consumers who face liquidity constraints and earnings uncertainty, economic theory predicts that the incentive to conserve should be strongest among families with the youngest children. We test this prediction using data from Florida's Family Transition Program, a randomized welfare reform experiment. Our estimates generally exhibit the predicted age dependence, which suggests that time limits affect welfare use before they become binding. Our estimates indicate that, in the absence of other reforms that increased welfare use, FTP's time limit would have reduced welfare receipt by 16 percent.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 111 (2003)
Issue (Month): 3 (June)
Pages: 530-554

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Handle: RePEc:ucp:jpolec:v:111:y:2003:i:3:p:530-554

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  1. Christopher A. Swann, 2004. "Welfare Reform when Recipients are Forward-Looking," Department of Economics Working Papers 04-04, Stony Brook University, Department of Economics.
  2. Shelly J. Lundberg & Robert A. Pollak & Terence J. Wales, 1997. "Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 463-480.
  3. Rebecca M. Blank, 2000. "What Causes Public Assistance Caseloads to Grow?," JCPR Working Papers 18, Northwestern University/University of Chicago Joint Center for Poverty Research.
  4. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  5. Greg J. Duncan & Kathleen Mullan Harris & Johanne Boisjoly, . "Time Limits and Welfare Reform: New Estimates of the Number and Characteristics of Affected Families," IPR working papers 97-3, Institute for Policy Resarch at Northwestern University.
  6. O'Neill, June A & Bassi, Laurie J & Wolf, Douglas A, 1987. "The Duration of Welfare Spells," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 241-48, May.
  7. Greg Duncan & Kathleen Mullan Harris & Johanne Boisjoly, 1997. "Time Limits and Welfare Reform: New Estimates of the Number and Characteristics of Affected Families," JCPR Working Papers 1, Northwestern University/University of Chicago Joint Center for Poverty Research.
  8. Rosenzweig, Mark R & Wolpin, Kenneth I, 1994. "Parental and Public Transfers to Young Women and Their Children," American Economic Review, American Economic Association, vol. 84(5), pages 1195-1212, December.
  9. Rebecca M. Blank, 1999. "What Goes Up Must Come Down? Explaining Recent Changes in Public Assistance Caseloads," JCPR Working Papers 78, Northwestern University/University of Chicago Joint Center for Poverty Research.
  10. 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.
  11. Kornfeld, Robert & Bloom, Howard S, 1999. "Measuring Program Impacts on Earnings and Employment: Do Unemployment Insurance Wage Reports from Employers Agree with Surveys of Individuals?," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 168-97, January.
  12. Schoeni, R-F, 1996. "Does Aid to Families with Dependent Children Displace Familial Assistance?," Papers 96-12, RAND - Labor and Population Program.
  13. J. P. Ziliak & D. N. Figlio & E. E. Davis & L. S. Connolly, . "Accounting for the Decline in AFDC Caseloads: Welfare Reform or Economic Growth?," Institute for Research on Poverty Discussion Papers 1151-97, University of Wisconsin Institute for Research on Poverty.
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