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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5774.
Length: Date of creation: Apr 1999 Date of revision: Publication status: published as Journal of Public Economics 68 (1998) 421-452 Handle: RePEc:nbr:nberwo:5774
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Find related papers by JEL classification: H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
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