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The Dynamics of Welfare Fraud: An Econometric Duration Model in Discrete Time

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  • Douglas Wolf
  • David Greenberg

Abstract

An important source of errors in transfer payments programs is the fraudulent misreporting of earnings received by recipients. We propose a model of the recipient's decision to report income and the expected penalties if caught engaging in fraud. We discuss several features of the detection and penalty structures in the AFDC and Food Stamps programs and present estimates of a model of the duration of fraudulent earnings-misreporting episodes. We find that recipients respond to increases in the returns to fraud by lengthening their episodes of misreporting. However, the level of fraudulent activity at any given time is rather low.

Suggested Citation

  • Douglas Wolf & David Greenberg, 1986. "The Dynamics of Welfare Fraud: An Econometric Duration Model in Discrete Time," Journal of Human Resources, University of Wisconsin Press, vol. 21(4), pages 437-455.
  • Handle: RePEc:uwp:jhriss:v:21:y:1986:i:4:p:437-455
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    Cited by:

    1. Orley Ashenfelter & David Ashmore & Olivier Deschenes, 1998. "Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States," Working Papers 791, Princeton University, Department of Economics, Industrial Relations Section..
    2. Ashenfelter, Orley & Ashmore, David & Deschenes, Olivier, 2005. "Do unemployment insurance recipients actively seek work? Evidence from randomized trials in four U.S. States," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 53-75.
    3. Martin Halla & Friedrich G. Schneider, 2005. "Taxes and Benefits: Two Distinct Options to Cheat on the State?," Economics working papers 2005-05, Department of Economics, Johannes Kepler University Linz, Austria.
    4. David Card & Brian P. McCall, 1994. "Is Workers' Compensation Covering Uninsured Medical Costs? Evidence from the 'Monday Effect'," Working Papers 706, Princeton University, Department of Economics, Industrial Relations Section..
    5. Martin Halla & Mario Lackner & Friedrich Schneider, 2009. "An Empirical Analysis of the Dynamics of the Welfare State: the Case of Benefit Morale," CESifo Working Paper Series 2641, CESifo Group Munich.
    6. Philip K. Robins, 1990. "A Decade Of Declining Welfare Participation: Sorting Out The Causes," Contemporary Economic Policy, Western Economic Association International, vol. 8(1), pages 110-123, January.

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