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The Effects of Single Mothers' Welfare Participation and Work Decisions on Children's Attainments

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  • Hau Chyi

    ()
    (WISE, Xiamen University, China)

  • Orgul Ozturk

    (Moore School of Business, University of South Carolina)

Abstract

This research examines the effects of mothers' welfare and work decisions on their children's attainments using two types of estimation methods in Stata: (1) an instrumental variables (IV) and (2) a nonlinear simultaneous equation estimation. The estimator employs sibling comparisons in a random effect framework and an instrumental variables approach to address the unobserved heterogeneity that may influence mothers' work and welfare decisions. We use the popular Stata command -ivreg2- to estimate the coefficients. Since production function of a child's ability can be written as a nonlinear function in a mother's decisions, we can also use the -nlsur- command to simulatneously estimate the production function as well as the (first-stage) IV projections. We focus on children who were born to single mothers with twelve or fewer years of schooling. IVs in this study are a mother's expected years of work and welfare use during childhood. The identification comes from the variation in mothers' different economic incentives that arises from the AFDC benefit structures across U.S. states. The estimates imply that, relative to no welfare participation, participating in welfare for one to three years provides up to a 5 percentage point gain in a child's Picture Individual Achievement Test (PIAT) scores. The negative effect of childhood welfare participation on adult earnings found by others is not significant if one accounts for mothers' work decisions. At the estimated values of the model parameters, a mother's number of years of work contributes between $3,000 and $7,000 1996 dollars to her child's labor income, but has no significant effect on the child's PIAT test scores. Finally, children's number of years of schooling is relatively unresponsive to mothers' work and welfare participation choices.

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Bibliographic Info

Paper provided by Stata Users Group in its series Summer North American Stata Users' Group Meetings 2008 with number 9.

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Date of creation: 29 Jul 2008
Date of revision: 28 Aug 2008
Handle: RePEc:boc:nsug08:9

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Web page: http://stata.com/meeting/snasug08/
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  1. Terra McKinnish & Seth Sanders & Jeffrey Smith, 1999. "Estimates of Effective Guarantees and Tax Rates in the AFDC Program for the Post-OBRA Period," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 312-345.
  2. Venti, Steven F, 1984. "The Effects of Income Maintenance on Work, Schooling, and Non-Market Activities of Youth," The Review of Economics and Statistics, MIT Press, vol. 66(1), pages 16-25, February.
  3. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  4. Peters, H Elizabeth, 1992. "Patterns of Intergenerational Mobility in Income and Earnings," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 456-66, August.
  5. Gordon B. Dahl & Lance Lochner, 2005. "The Impact of Family Income on Child Achievement," NBER Working Papers 11279, National Bureau of Economic Research, Inc.
  6. Janet Currie & Duncan Thomas, 1993. "Does Head Start Make a Difference?," NBER Working Papers 4406, National Bureau of Economic Research, Inc.
  7. Raquel Bernal, 2004. "Employment and Child Care Decisions of Mothers and the Well-being of their Children," Econometric Society 2004 North American Winter Meetings 361, Econometric Society.
  8. Janet Currie & Duncan Thomas, 1999. "Early Test Scores, Socioeconomic Status and Future Outcomes," NBER Working Papers 6943, National Bureau of Economic Research, Inc.
  9. Virginia W. Knox, 1996. "The Effects of Child Support Payments on Developmental Outcomes for Elementary School-Age Children," Journal of Human Resources, University of Wisconsin Press, vol. 31(4), pages 816-840.
  10. Michael P. Keane & Kenneth I. Wolpin, 2002. "Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 570-599.
  11. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
  12. Michael P. Keane & Kenneth I. Wolpin, 2002. "Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part II: Empirical Results," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 600-622.
  13. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  14. Ribar, David C., 1993. "A multinomial logit analysis of teenage fertility and high school completion," Economics of Education Review, Elsevier, vol. 12(2), pages 153-164, June.
  15. Gottschalk, Peter, 1990. "AFDC Participation across Generations," American Economic Review, American Economic Association, vol. 80(2), pages 367-71, May.
  16. M. Anne Hill & June O'Neill, 1994. "Family Endowments and the Achievement of Young Children with Special Reference to the Underclass," Journal of Human Resources, University of Wisconsin Press, vol. 29(4), pages 1064-1100.
  17. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
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