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The Decline of Welfare Benefits in the U.S.: The Role of Wage Inequality

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  • Robert Moffitt
  • David Ribar
  • Mark Wilhelm

Abstract

Welfare benefits in the U.S. have experienced a much-studied secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of" our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5774.

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Date of creation: Sep 1996
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Publication status: published as Journal of Public Economics 68 (1998) 421-452
Handle: RePEc:nbr:nberwo:5774

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