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The decline of welfare benefits in the U.S.: the role of wage inequality

  • Moffitt, Robert
  • Ribar, David
  • Wilhelm, Mark

Welfare benefits in the U.S. have experienced a much-studied secular decline since the mid-1970s. We explore a new hypothesis for this decline related to the increase in wage inequality in the labor market and the decline of real wages at the bottom of the distribution: we posit that voters prefer benefits which are tied to low-skilled wages. We test the hypothesis using a 1969-1992 panel of state-level data. An additional contribution of" our analysis is the use of General Social Survey data on voter preferences for welfare which we combine with Current Population Survey data to determine the voter in each state who has the median preferred welfare benefit level. Our analysis reveals considerable evidence in support of a role for declining real wages in the decline of welfare benefits.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 68 (1998)
Issue (Month): 3 (June)
Pages: 421-452

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Handle: RePEc:eee:pubeco:v:68:y:1998:i:3:p:421-452
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  16. 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.
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