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Time-inconsistency and Welfare Program Participation: Evidence from the NLSY

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Abstract

We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the NLSY 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify the utility loss stemming from the inability to commit to future decisions, and the potential utility gains from commitment mechanisms such as welfare time limits and work requirements.

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File URL: http://cowles.econ.yale.edu/P/cd/d14b/d1465.pdf
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Bibliographic Info

Paper provided by Cowles Foundation for Research in Economics, Yale University in its series Cowles Foundation Discussion Papers with number 1465.

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Length: 49 pages
Date of creation: Jun 2004
Date of revision:
Publication status: Published in International Economic Review (November 2009), 50(4): 1043-1077
Handle: RePEc:cwl:cwldpp:1465

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Postal: Yale University, Box 208281, New Haven, CT 06520-8281 USA
Phone: (203) 432-3702
Fax: (203) 432-6167
Web page: http://cowles.econ.yale.edu/
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Postal: Cowles Foundation, Yale University, Box 208281, New Haven, CT 06520-8281 USA

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Keywords: Time inconsistent preferences; Welfare reform; Labor supply;

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