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Explaining Welfare Reform: Public Choice and the Labor Market

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  • R. A. Moffitt

Abstract

This paper seeks to identify factors that could plausibly have led to the contractionary welfare reform initiatives begun at the state and federal levels in the United States in the 1990s, initiatives concentrated on the Aid to Families with Dependent Children (AFDC) program. A review of aggregate time-series evidence, cross-sectional regression research, and studies of attitudes toward welfare spending and toward welfare recipients suggests a role for three types of factors. First, a major expansion of the U.S. welfare system in the late 1980s in terms of expenditures and caseloads may have led voters to want to retrench by cutting back on the AFDC program, even though that program was not primarily responsible for the expansion. Second, declines in the relative and absolute levels of household income, wages, and employment rates among the disadvantaged population may have driven up caseloads and costs, increased the social distance of voters from the poor, heightened concern with work incentives, and led, more generally, to a decrease in the perceived “deservingness” of the poor. Third, a surge of births to unmarried mothers in the 1980s is suggested, by cross-sectional and attitudinal evidence, to have led to a reduction in voter support for the AFDC program.

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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 1195-99.

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Handle: RePEc:wop:wispod:1195-99

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  1. Lindert, Peter H., 2000. "Three centuries of inequality in Britain and America," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 3, pages 167-216 Elsevier.
  2. Anne E. Winkler, 1998. "State Experimentation With Time-Limited AFDC Benefits: What Differentiates Reform-Minded States From Others?," Public Finance Review, , vol. 26(2), pages 155-183, March.
  3. 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.
  4. Preston, Ian & Ridge, Michael, 1995. "Demand for Local Public Spending: Evidence from the British Social Attitudes Survey," Economic Journal, Royal Economic Society, vol. 105(430), pages 644-60, May.
  5. Varian, Hal R., 1980. "Redistributive taxation as social insurance," Journal of Public Economics, Elsevier, vol. 14(1), pages 49-68, August.
  6. Rebecca M. Blank, 2001. "What Causes Public Assistance Caseloads to Grow?," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 85-118.
  7. Kristov, Lorenzo & Lindert, Peter & McClelland, Robert, 1992. "Pressure groups and redistribution," Journal of Public Economics, Elsevier, vol. 48(2), pages 135-163, July.
  8. Sam Peltzman, 1980. "The Growth of Government," University of Chicago - George G. Stigler Center for Study of Economy and State 1, Chicago - Center for Study of Economy and State.
  9. Peter Gottschalk & Timothy M. Smeeding, 1997. "Cross-National Comparisons of Earnings and Income Inequality," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 633-687, June.
  10. Robin Boadway & Michael Keen, 1999. "Redistribution," Working Papers 983, Queen's University, Department of Economics.
  11. Pauly, Mark V., 1973. "Income redistribution as a local public good," Journal of Public Economics, Elsevier, vol. 2(1), pages 35-58, February.
  12. Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
  13. James M. Poterba, 1993. "State Responses to Fiscal Crisis: The Effects of Budgetary Institutionsand Politics," NBER Working Papers 4375, National Bureau of Economic Research, Inc.
  14. Hall, John & Preston, Ian, 2000. "Tax price effects on attitudes to hypothecated tax increases," Journal of Public Economics, Elsevier, vol. 75(3), pages 417-438, March.
  15. David C. Ribar & Mark O. Wilhelm, 1999. "The Demand for Welfare Generosity," The Review of Economics and Statistics, MIT Press, vol. 81(1), pages 96-108, February.
  16. Robert A. Moffitt, 1999. "Demographic Change and Public Assistance Expenditures," NBER Working Papers 6995, National Bureau of Economic Research, Inc.
  17. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  18. Peter Lindert & Wen Hai & Shunli Yao, 2003. "Three Centuries Of Inequality In Britain And America," Working Papers 979, University of California, Davis, Department of Economics.
  19. Howard Chernick, 1998. "Fiscal Effects of Block Grants for the Needy: An Interpretation of the Evidence," International Tax and Public Finance, Springer, vol. 5(2), pages 205-233, May.
  20. Grossman, Herschel I., 1995. "Robin hood and the redistribution of property income," European Journal of Political Economy, Elsevier, vol. 11(3), pages 399-410, September.
  21. Shroder, Mark, 1995. "Games the States Don't Play: Welfare Benefits and the Theory of Fiscal Federalism," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 183-91, February.
  22. Orr, Larry L, 1976. "Income Transfers as a Public Good: An Application to AFDC," American Economic Review, American Economic Association, vol. 66(3), pages 359-71, June.
  23. Jason Barabas, 1998. "Wage Erosion, Economic Assessments, and Social Welfare Opinions," JCPR Working Papers 56, Northwestern University/University of Chicago Joint Center for Poverty Research.
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Cited by:
  1. Holzner, Christian & Meier, Volker & Werding, Martin, 2010. "Workfare, monitoring, and efficiency wages," Munich Reprints in Economics 19396, University of Munich, Department of Economics.
  2. Sabatini, Fabio & Sarracino, Francesco & Yamamura, Eiji, 2014. "Social norms on rent seeking and preferences for redistribution," MPRA Paper 57151, University Library of Munich, Germany.
  3. Volker Meier, 2008. "Workfare in an efficiency wage model," Empirica, Springer, vol. 35(2), pages 165-178, April.
  4. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.

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