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Bounding the Labor Supply Responses to a Randomized Welfare Experiment: A Revealed Preference Approach

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  • Patrick Kline
  • Melissa Tartari

Abstract

We study the short-term impact of Connecticut's Jobs First welfare reform experiment on women's labor supply and welfare participation decisions. A nonparametric optimizing model is shown to restrict the set of counterfactual choices compatible with each woman's actual choice. These revealed preference restrictions yield informative bounds on the frequency of several intensive and extensive margin responses to the experiment. We find that welfare reform induced many women to work but led some others to reduce their earnings in order to receive assistance. The bounds on this latter "opt-in" effect imply that intensive margin labor supply responses are nontrivial. (JEL H23, H75, I38, J16, J22)

Suggested Citation

  • Patrick Kline & Melissa Tartari, 2016. "Bounding the Labor Supply Responses to a Randomized Welfare Experiment: A Revealed Preference Approach," American Economic Review, American Economic Association, vol. 106(4), pages 972-1014, April.
  • Handle: RePEc:aea:aecrev:v:106:y:2016:i:4:p:972-1014
    Note: DOI: 10.1257/aer.20130824
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    References listed on IDEAS

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    1. Garry F. Barrett & Stephen G. Donald, 2003. "Consistent Tests for Stochastic Dominance," Econometrica, Econometric Society, vol. 71(1), pages 71-104, January.
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    Cited by:

    1. repec:eee:pubeco:v:170:y:2019:i:c:p:1-14 is not listed on IDEAS
    2. Hartley, Robert Paul & Lamarche, Carlos, 2018. "Behavioral responses and welfare reform: Evidence from a randomized experiment," Labour Economics, Elsevier, vol. 54(C), pages 135-151.
    3. Pietro Tebaldi & Alexander Torgovitsky & Hanbin Yang, 2019. "Nonparametric Estimates of Demand in the California Health Insurance Exchange," NBER Working Papers 25827, National Bureau of Economic Research, Inc.
    4. Sören Blomquist & Whitney K. Newey, 2017. "The Bunching Estimator Cannot Identify the Taxable Income Elasticity," CESifo Working Paper Series 6736, CESifo Group Munich.
    5. Friedrichsen, Jana & König, Tobias & Schmacker, Renke, 2018. "Social image concerns and welfare take-up," Journal of Public Economics, Elsevier, vol. 168(C), pages 174-192.
    6. Sneha Elango & Jorge Luis García & James J. Heckman & Andrés Hojman, 2015. "Early Childhood Education," NBER Chapters,in: Economics of Means-Tested Transfer Programs in the United States, Volume 2, pages 235-297 National Bureau of Economic Research, Inc.
    7. Kamat, Vishal, 2019. "Identification with Latent Choice Sets," TSE Working Papers 19-1031, Toulouse School of Economics (TSE).
    8. Ivan A. Canay & Azeem M. Shaikh, 2016. "Practical and theoretical advances in inference for partially identified models," CeMMAP working papers CWP05/16, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    9. Bergolo, Marcelo & Cruces, Guillermo, 2016. "The Anatomy of Behavioral Responses to Social Assistance When Informal Employment Is High," IZA Discussion Papers 10197, Institute of Labor Economics (IZA).
    10. Vishal Kamat, 2017. "Identification with Latent Choice Sets," Papers 1711.02048, arXiv.org, revised Aug 2019.
    11. Adams, Abigail, 2019. "Mutually Consistent Revealed Preference Demand Predictions," CEPR Discussion Papers 13580, C.E.P.R. Discussion Papers.
    12. Marianne P. Bitler & Jonah B. Gelbach & Hilary W. Hoynes, 2017. "Can Variation in Subgroups' Average Treatment Effects Explain Treatment Effect Heterogeneity? Evidence from a Social Experiment," The Review of Economics and Statistics, MIT Press, vol. 99(4), pages 683-697, July.
    13. Steven F. Lehrer & R. Vincent Pohl & Kyungchul Song, 2016. "Targeting Policies: Multiple Testing and Distributional Treatment Effects," NBER Working Papers 22950, National Bureau of Economic Research, Inc.
    14. Marc K Chan, 2014. "Measuring the Dynamic Effects of Welfare Time Limits," Working Paper Series 23, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
    15. Deuchert, Eva & Eugster, Beatrix, 2019. "Income and substitution effects of a disability insurance reform," Journal of Public Economics, Elsevier, vol. 170(C), pages 1-14.
    16. Jesse Rothstein & Till von Wachter, 2016. "Social Experiments in the Labor Market," NBER Working Papers 22585, National Bureau of Economic Research, Inc.
    17. Anthony Strittmatter, 2018. "What Is the Value Added by Using Causal Machine Learning Methods in a Welfare Experiment Evaluation?," Papers 1812.06533, arXiv.org, revised Mar 2019.
    18. Beffy, Magali & Blundell, Richard & Bozio, Antoine & Laroque, Guy & Tô, Maxime, 2019. "Labour supply and taxation with restricted choices," Journal of Econometrics, Elsevier, vol. 211(1), pages 16-46.
    19. Marx, Benjamin M., 2018. "Dynamic Bunching Estimation with Panel Data," MPRA Paper 88647, University Library of Munich, Germany.
    20. Marx, Benjamin M., 2018. "The Cost of Requiring Charities to Report Financial Information," MPRA Paper 88660, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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