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Welfare Transitions in the 1990s: The Economy, Welfare Policy, and the EITC

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  • Jeffrey Grogger

Abstract

The rapid decline in the welfare caseload remains a subject of keen interest to both policymakers and researchers. In this paper, I use data from the Survey of Income and Program Participation spanning the period from 1986 to 1999 to analyze how the economy, welfare reform, the Earned Income Tax Credit, and other factors influenced welfare entries and exits, which in turn affect the caseload. I find that the decline in the welfare caseload resulted from both increases in exits and decreases in entries. Entries were most significantly affected by the economy, the decline in the real value of welfare benefits, and the expansion of the EITC. The EITC had substantial effects on initial entries onto welfare. Exits were most significantly affected by the economy and federal welfare reform. Federal reform had its greatest effects on longer-term spells of the type generally experienced by more disadvantaged recipients. Some out-of-sample predictions help explain the otherwise puzzling observation that, despite substantial increases in the unemployment rate since 2000, caseloads have remained roughly constant.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9472.

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Date of creation: Feb 2003
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Publication status: published as Grogger, Jeffrey. "The Effects Of Time Limits, The EITC, And Other Policy Changes On Welfare Use, Work, And Income Among Female-headed Families," Review of Economics and Statistics, 2003, v85(2,May), 394-408.
Handle: RePEc:nbr:nberwo:9472

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  1. Marieka Klawitter & Robert D. Plotnick & Mark Evan Edwards, 2000. "Determinants of initial entry onto welfare by young women," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 19(4), pages 527-546.
  2. Hilary Williamson Hoynes, 2000. "Local Labor Markets And Welfare Spells: Do Demand Conditions Matter?," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 351-368, August.
  3. David C. Ribar, 2005. "Transitions from Welfare and the Employment Prospects of Low-Skill Workers," Southern Economic Journal, Southern Economic Association, vol. 71(3), pages 514-533, January.
  4. Rebecca M. Blank & Patricia Ruggles, 1993. "When Do Women Use AFDC & Food Stamps? The Dynamics of Eligibility vs. Participation," NBER Working Papers 4429, National Bureau of Economic Research, Inc.
  5. Frank, Robert H, 1978. "How Long Is a Spell of Unemployment?," Econometrica, Econometric Society, vol. 46(2), pages 285-302, March.
  6. Bruce D. Meyer & Dan T. Rosenbaum, 2001. "Welfare, The Earned Income Tax Credit, And The Labor Supply Of Single Mothers," The Quarterly Journal of Economics, MIT Press, vol. 116(3), pages 1063-1114, August.
  7. Rebecca M. Blank, 1999. "What Goes Up Must Come Down? Explaining Recent Changes in Public Assistance Caseloads," JCPR Working Papers 78, Northwestern University/University of Chicago Joint Center for Poverty Research.
  8. Robert M. Hutchens, 1981. "Entry and Exit Transitions in a Government Transfer Program: The Case of Aid to Families with Dependent Children," Journal of Human Resources, University of Wisconsin Press, vol. 16(2), pages 217-237.
  9. Jeffrey Grogger, 2004. "Time Limits and Welfare Use," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
  10. Robert Moffitt, 1987. "Historical Growth in Participation in Aid to Families with Dependent Children: Was There a Structural Shift?," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 9(3), pages 347-363, April.
  11. 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.
  12. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc.
  13. O'Neill, June A & Bassi, Laurie J & Wolf, Douglas A, 1987. "The Duration of Welfare Spells," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 241-48, May.
  14. David N. Figlio & James P. Ziliak, 1999. "Welfare Reform, the Business Cycle, and the Decline in AFDC Caseloads," JCPR Working Papers 77, Northwestern University/University of Chicago Joint Center for Poverty Research.
  15. V. Joseph Hotz, 2003. "The Earned Income Tax Credit," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 141-198 National Bureau of Economic Research, Inc.
  16. Jacob A. Klerman & Steven J. Haider, 2001. "A Stock-Flow Analysis of the Welfare Caseload: Insights from California Economic Conditions," Working Papers 01-02, RAND Corporation Publications Department.
  17. 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.
  18. Jeffrey Grogger & Steven Haider & Jacob Klerman & Elizabeth Roth, 2003. "The Relationship Between the Economy and the Welfare Caseload: A Dynamic Approach," Working Papers 03-06, RAND Corporation Publications Department.
  19. Blank, Rebecca M., 1989. "Analyzing the length of welfare spells," Journal of Public Economics, Elsevier, vol. 39(3), pages 245-273, August.
  20. Jeffrey Grogger & Steven J. Haider & Jacob Klerman, 2003. "Why Did the Welfare Rolls Fall During the 1990's? The Importance of Entry," American Economic Review, American Economic Association, vol. 93(2), pages 288-292, May.
  21. 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, May.
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Cited by:
  1. Snarr, Hal W. & Burkey, Mark L., 2006. "A preliminary investigation of welfare migration induced by time limits," MPRA Paper 36228, University Library of Munich, Germany.
  2. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2003. "Welfare Reform and Children's Living Arrangements," Working Papers 111, RAND Corporation Publications Department.
  3. Jeffrey Grogger & Steven J. Haider & Jacob Klerman, 2003. "Why Did the Welfare Rolls Fall During the 1990's? The Importance of Entry," American Economic Review, American Economic Association, vol. 93(2), pages 288-292, May.
  4. Ayala, Luis & Rodriguez, Magdalena, 2007. "Barriers to employment and welfare dynamics: Evidence from Spain," Journal of Policy Modeling, Elsevier, vol. 29(2), pages 237-257.
  5. repec:ebl:ecbull:v:9:y:2008:i:8:p:1-9 is not listed on IDEAS
  6. Kartik Athreya & Devin Reilly & Nicole B. Simpson, 2010. "Earned income tax credit recipients: income, marginal tax rates, wealth, and credit constraints," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 229-258.
  7. Hal Snarr & Dan Axelsen, 2008. "Are Welfare Eligible Households Forward Looking?," Economics Bulletin, AccessEcon, vol. 9(8), pages 1-9.
  8. Emily E. Wiemers, 2014. "The Effect of Unemployment on Household Composition and Doubling Up," Working Papers 2014_05, University of Massachusetts Boston, Economics Department.

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