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Time-Inconsistency And Welfare Program Participation: Evidence From The Nlsy

  • Hanming Fang
  • Dan Silverman

We empirically implement a dynamic structural model of labor supply and welfare program participation for agents with potentially time-inconsistent preferences. Using panel data on the choices of single women with children from the National Longitudinal Surveys (NLSY) 1979, we provide estimates of the degree of time-inconsistency, and of its influence on the welfare take-up decision. With these estimates, we conduct counterfactual experiments to quantify a measure of the utility loss stemming from the inability to commit to future decisions, and the potential gains from commitment mechanisms such as welfare time limits and work requirements. Copyright © (2009) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 50 (2009)
Issue (Month): 4 (November)
Pages: 1043-1077

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Handle: RePEc:ier:iecrev:v:50:y:2009:i:4:p:1043-1077
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