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The intergenerational correlation in AFDC participation: Welfare trap or poverty trap?

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  • P. B. Levine
  • D. J. Zimmerman

Abstract

Several recent studies have shown that daughters whose mothers have participated in the welfare program Aid to Families with Dependent Children (AFDC), are themselves more likely to participate in AFDC when they head their own household. Other studies have shown that the earnings of parents and their children are highly correlated across generations. This suggests that any variable correlated with income such as AFDC participation will also be correlated across generations. This paper uses data from the original and youth cohorts of the National Longitudinal Surveys to investigate the question of whether the link in mother-daughter welfare participation is a causal relationship, or whether it can be explained by the expected intergenerational correlation in earnings. Several reduced-form probit equations are estimated, and attention is directed to the potential endogeneity of key explanatory variables. The empirical findings suggest that much of the observed correlation in AFDC participation across generations can be explained by the intergenerational correlation of income and other family characteristics.

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Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1100-96.

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Handle: RePEc:wop:wispod:1100-96

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  1. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  2. Antel, John J, 1992. "The Intergenerational Transfer of Welfare Dependency: Some Statistical Evidence," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 467-73, August.
  3. Peter Gottschalk, 1993. "Is The Correlation In Welfare Participation Across Generations Spurious?," Boston College Working Papers in Economics 224, Boston College Department of Economics.
  4. Gottschalk, Peter, 1990. "AFDC Participation across Generations," American Economic Review, American Economic Association, vol. 80(2), pages 367-71, May.
  5. Plant, Mark W, 1984. "An Empirical Analysis of Welfare Dependence," American Economic Review, American Economic Association, vol. 74(4), pages 673-84, September.
  6. David Card & Alan Krueger, 1990. "Does School Quality Matter? Returns to Education and the Characteristics of Public Schools in the United States," NBER Working Papers 3358, National Bureau of Economic Research, Inc.
  7. Solon, Gary, 1992. "Intergenerational Income Mobility in the United States," American Economic Review, American Economic Association, vol. 82(3), pages 393-408, June.
  8. Joshua D. Angrist, 1991. "Instrumental Variables Estimation of Average Treatment Effects in Econometrics and Epidemiology," NBER Technical Working Papers 0115, National Bureau of Economic Research, Inc.
  9. Gary Solon & Mary Corcoran & Roger Gordon & Deborah Laren, 1988. "Sibling and Intergenerational Correlations in Welfare Program Participation," Journal of Human Resources, University of Wisconsin Press, vol. 23(3), pages 388-396.
  10. Zimmerman, David J, 1992. "Regression toward Mediocrity in Economic Stature," American Economic Review, American Economic Association, vol. 82(3), pages 409-29, June.
  11. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  12. Sara McLanahan, 1988. "Family structure and dependency: Early transitions to female household headship," Demography, Springer, vol. 25(1), pages 1-16, February.
  13. Joseph G. Altonji & Thomas A. Dunn, 1991. "Relationships Among the Family Incomes and Labor Market Outcomes of Relatives," NBER Working Papers 3724, National Bureau of Economic Research, Inc.
  14. Blank, Rebecca M., 1988. "The effect of welfare and wage levels on the location decisions of female-headed households," Journal of Urban Economics, Elsevier, vol. 24(2), pages 186-211, September.
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Cited by:
  1. Jonathan Gruber, 2003. "Medicaid," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 15-78 National Bureau of Economic Research, Inc.
  2. Levine, Phillip B. & Zimmerman, David J., 2005. "Children's welfare exposure and subsequent development," Journal of Public Economics, Elsevier, vol. 89(1), pages 31-56, January.
  3. Michael B. Coelli & David A. Green & William P. Warburton, 2004. "Breaking the cycle? The effect of education on welfare receipt among children of welfare recipients," IFS Working Papers W04/14, Institute for Fiscal Studies.
  4. Kelly Balistreri, 2010. "Welfare and the Children of Immigrants: Transmission of Dependence or Investment in the Future?," Population Research and Policy Review, Springer, vol. 29(5), pages 715-743, October.
  5. P. B. Levine & D. J. Zimmerman, . "An empirical analysis of the welfare magnet debate using the NLSY," Institute for Research on Poverty Discussion Papers 1098-96, University of Wisconsin Institute for Research on Poverty.
  6. Oscar A. Mitnik, 2007. "Intergenerational transmission of welfare dependency: The effects of length of exposure," Working Papers 0715, University of Miami, Department of Economics.
  7. Corak, Miles & Gustafsson, Björn Anders & Österberg, Torun, 2000. "Intergenerational Influences on the Receipt of Unemployment Insurance in Canada and Sweden," IZA Discussion Papers 184, Institute for the Study of Labor (IZA).

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