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Work, Welfare, and Family Structure: A Review of the Evidence

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  • H. W. Hoynes

Abstract

Support for reforming the welfare system in the United States is widespread, as evidenced by legislative action by many states and, most recently, the federal government. Although part of the interest in reform is fiscally motivated, interest also exists in making significant changes to address two prominent criticisms of the current system of public assistance in the United States: (1) the system has significant, adverse, work incentives; and (2) the system discourages the formation of two-parent families and is responsible in major part for the high and rising rates of female headship and out-of-wedlock births. This paper uses the available empirical evidence to explore the validity of these criticisms and to evaluate the impact of various reforms. The programs examined include Aid to Families with Dependent Children, Food Stamps, and Medicaid. The paper relies on evidence based on three sources of variation in welfare policy: cross-state variation, over-time variation, and demonstration projects at the state level. The conclusions are that current reforms aimed at reducing female headship and nonmarital births, such as "family caps," eliminating benefits for teens, and equal treatment of one- and two-parent families, are unlikely to generate large effects. Changes in implicit tax rates and benefit formulas may increase work among current recipients, but overall work effort may not be affected. These predictions should be accompanied by a word of caution: many of the proposed changes have never been implemented at the state or federal level and require out-of-sample predictions. Current state experimentation may help fill this gap.

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Bibliographic Info

Paper provided by University of Wisconsin Institute for Research on Poverty in its series Institute for Research on Poverty Discussion Papers with number 1103-96.

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Handle: RePEc:wop:wispod:1103-96

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  2. David T. Ellwood, 1986. "Targeting "Would-Be" Long-Term Recipients of AFDC," Mathematica Policy Research Reports 652, Mathematica Policy Research.
  3. Hoynes, Hilary & MaCurdy, Thomas, 1994. "Has the Decline in Benefits Shortened Welfare Spells?," American Economic Review, American Economic Association, vol. 84(2), pages 43-48, May.
  4. M. Keane & R. Moffitt, . "A structural model of multiple welfare program participation and labor supply," Institute for Research on Poverty Discussion Papers 1080-96, University of Wisconsin Institute for Research on Poverty.
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  6. Nada Eissa & Jeffrey B. Liebman, 1995. "Labor Supply Response to the Earned Income Tax Credit," NBER Working Papers 5158, National Bureau of Economic Research, Inc.
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  8. Becker, Gary S, 1974. "A Theory of Marriage: Part II," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S11-S26, Part II, .
  9. Dickert, Stacy & Houser, Scott & Scholz, John Karl, 1994. "Taxes and the Poor: A Microsimulation Study of Implicit and Explicit Taxes," National Tax Journal, National Tax Association, vol. 47(3), pages 621-38, September.
  10. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
  11. 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.
  12. Robert Moffitt & Barbara Wolfe, 1990. "The Effect of the Medicaid Program on Welfare Participation and Labor Supply," NBER Working Papers 3286, National Bureau of Economic Research, Inc.
  13. Yelowitz, Aaron S, 1995. "The Medicaid Notch, Labor Supply, and Welfare Participation: Evidence from Eligibility Expansions," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 909-39, November.
  14. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  15. 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.
  16. Frank Levy, 1979. "The Labor Supply of Female Household Heads, or AFDC Work Incentives Don't Work Too Well," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 76-97.
  17. R. A. Moffitt & R. Reville & A. E. Winkler, . "Beyond single mothers: Cohabition, marriage, and the U.S. welfare system," Institute for Research on Poverty Discussion Papers 1068-95, University of Wisconsin Institute for Research on Poverty.
  18. Anne E. Winkler, 1995. "Does AFDC-up encourage two-parent families?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 14(1), pages 4-24.
  19. 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.
  20. Moffitt, Robert, 1990. "The effect of the U.S. welfare system on marital status," Journal of Public Economics, Elsevier, vol. 41(1), pages 101-124, February.
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  22. Moffitt, Robert, 1989. "Estimating the Value of an In-Kind Transfer: The Case of Food Stamps," Econometrica, Econometric Society, vol. 57(2), pages 385-409, March.
  23. Anne E. Winkler, 1991. "The Incentive Effects of Medicaid on Women's Labor Supply," Journal of Human Resources, University of Wisconsin Press, vol. 26(2), pages 308-337.
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  25. Rebecca M. Blank & Patricia Ruggles, 1996. "When Do Women Use Aid to Families with Dependent Children and Food Stamps? The Dynamics of Eligibility Versus Participation," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 57-89.
  26. Robert Moffitt, 1994. "Welfare Effects on Female Headship with Area Effects," Journal of Human Resources, University of Wisconsin Press, vol. 29(2), pages 621-636.
  27. Rebecca M. Blank, 1989. "The Effect of Medical Need and Medicaid on AFDC Participation," Journal of Human Resources, University of Wisconsin Press, vol. 24(1), pages 54-87.
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