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Instrumental Variable Estimates of the Labor Market Spillover Effects of Welfare Reform

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Author Info
Timothy J. Bartik () (W.E. Upjohn Institute for Employment Research)

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Abstract

By increasing the labor supply of welfare recipients, welfare reform may reduce wages and increase unemployment among other less-educated groups. These "spillover effects" are difficult to estimate because welfare caseloads decrease in response to improvements in the economy, which leads caseload reductions to be associated with improvements in labor market outcomes. This paper corrects for the endogeneity of caseloads by using instruments that reflect policy. The estimates suggest that welfare reform has significant spillover effects: welfare reform reduces employment of male high school dropouts, and reduces wages of single mothers and male high school dropouts.

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Publisher Info
Paper provided by W.E. Upjohn Institute for Employment Research in its series Staff Working Papers with number 02-78.

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Date of creation: Apr 2002
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Handle: RePEc:upj:weupjo:02-78

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Related research
Keywords: welfare; reform; spillover; effects; wages; employment; Bartik; Upjohn;

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Find related papers by JEL classification:
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs

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  1. H. J. Holzer, . "Employer Demand, AFDC Recipients, and Labor Market Policy," Institute for Research on Poverty Discussion Papers 1115-96, University of Wisconsin Institute for Research on Poverty. [Downloadable!]
  2. Timothy J. Bartik & Randall W. Eberts, 1999. "Examining the Effect of Industry Trends and Structure on Welfare Caseloads," Staff Working Papers 99-54, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  3. Robert Moffitt, 2002. "The Temporary Assistance for Needy Families Program," NBER Working Papers 8749, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Darren H. Lubotsky, 1999. "The Labor Market Effects of Welfare Reform," Labor and Demography 9904001, EconWPA. [Downloadable!]
    Other versions:
  6. Timothy J. Bartik, 1998. "The Labor Supply Effects of Welfare Reform," Staff Working Papers 98-53, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  7. Lawrence F. Katz, 1996. "Wage Subsidies for the Disadvantaged," NBER Working Papers 5679, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. 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.
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