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What Mean Impacts Miss: Distributional Effects of Welfare Reform Experiments

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Author Info
Marianne Bitler
Jonah Gelbach
Hilary Hoynes

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Abstract

Labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings, transfers, and income. Yet most welfare reform research focuses on mean impacts. We investigate the importance of heterogeneity using random-assignment data from Connecticut's Jobs First waiver features key elements of post-1996 welfare programs. Estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory. Thus mean impacts miss a great deal. Looking separately at dropouts and other women does not improve the performance of mean impacts. Evaluating Jobs First relative to AFDC using a class of social welfare functions, we find that Jobs First's performance depends on the degree of inequality aversion, the relative valuation of earnings and transfers, and whether one accounts for Jobs First's greater costs. We conclude that welfare reform's effects are likely both more varied and more extensive than has been recognized.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10121.

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Date of creation: Nov 2003
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Handle: RePEc:nbr:nberwo:10121

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Find related papers by JEL classification:
I3 - Health, Education, and Welfare - - Welfare and Poverty
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General

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  2. Neil G. Bennett & Hsien-Hen Lu & Younghwan Song, 2002. "Welfare Reform and Changes in the Economic Well-Being of Children," NBER Working Papers 9399, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Heckman, James J & Smith, Jeffrey A, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring. [Downloadable!] (restricted)
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  6. Rajeev Dehejia, 1999. "Program Evaluation as a Decision Problem," NBER Working Papers 6954, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Jeffrey Grogger & Charles Michalopoulos, 2003. "Welfare Dynamics under Time Limits," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 530-554, June. [Downloadable!] (restricted)
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  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.
  9. Keisuke Hirano & Guido W. Imbens & Geert Ridder, 2003. "Efficient Estimation of Average Treatment Effects Using the Estimated Propensity Score," Econometrica, Econometric Society, vol. 71(4), pages 1161-1189, 07. [Downloadable!] (restricted)
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  10. 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.
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  11. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," Journal of Economic Literature, American Economic Association, vol. 40(4), pages 1105-1166, December.
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  12. Heckman, James J & Smith, Jeffrey, 1997. "Making the Most Out of Programme Evaluations and Social Experiments: Accounting for Heterogeneity in Programme Impacts," Review of Economic Studies, Blackwell Publishing, vol. 64(4), pages 487-535, October. [Downloadable!] (restricted)
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  14. Alberto Abadie & Joshua Angrist & Guido Imbens, 2002. "Instrumental Variables Estimates of the Effect of Subsidized Training on the Quantiles of Trainee Earnings," Econometrica, Econometric Society, vol. 70(1), pages 91-117, January. [Downloadable!] (restricted)
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  15. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 261-94, April. [Downloadable!] (restricted)
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  17. Gruber, Jonathan, 2000. "Cash welfare as a consumption smoothing mechanism for divorced mothers," Journal of Public Economics, Elsevier, vol. 75(2), pages 157-182, February. [Downloadable!] (restricted)
  18. Jeffrey Grogger, 2003. "The Effects of Time Limits, the EITC, and Other Policy Changes on Welfare Use, Work, and Income among Female-Headed Families," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 394-408, 02. [Downloadable!] (restricted)
  19. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-61, March. [Downloadable!] (restricted)
  20. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September. [Downloadable!] (restricted)
  21. Jonathan Gruber, 1996. "Cash Welfare as a Consumption Smoothing Mechanism for Single Mothers," NBER Working Papers 5738, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  22. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2003. "Some Evidence on Race, Welfare Reform, and Household Income," American Economic Review, American Economic Association, vol. 93(2), pages 293-298, May. [Downloadable!]
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