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Behavioral Responses and Welfare Reform: Evidence from a Randomized Experiment

Listed author(s):
  • Hartley, Robert Paul

    ()

    (Columbia University)

  • Lamarche, Carlos

    ()

    (University of Kentucky)

Recent studies have used a distributional analysis of welfare reform experiments suggesting that some individuals reduce hours in order to opt into welfare, an example of behavioral-induced participation. Using data on Connecticut's Jobs First experiment, we find no evidence of behavioral-induced participation at the highest conditional quantiles of earnings. We offer a simple explanation for this: women assigned to Jobs First incur welfare participation costs to labor supply at higher earnings where the control group is welfare ineligible. Moreover, as expected, behavioral components and costs of program participation do not seem to play a differential role at other conditional quantiles where both groups are eligible to participate. Our findings show that a welfare program imposes an estimated cost up to 10 percent of quarterly earnings, and these costs can be heterogeneous throughout the conditional earnings distribution. The evidence is obtained by employing a semi-parametric panel quantile estimator for a model that allows women to vary arbitrarily in preferences and costs of participating in welfare programs.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10905.

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Length: 38 pages
Date of creation: Jul 2017
Handle: RePEc:iza:izadps:dp10905
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  1. Bargain, Olivier & Orsini, Kristian, 2006. "In-work policies in Europe: Killing two birds with one stone?," Labour Economics, Elsevier, vol. 13(6), pages 667-697, December.
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  3. 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.
  4. Magne Mogstad & Chiara Pronzato, 2012. "Are Lone Mothers Responsive to Policy Changes? Evidence from a Workfare Reform in a Generous Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(4), pages 1129-1159, December.
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  7. James J. Heckman & Jeffrey Smith & Nancy Clements, 1997. "Making The Most Out Of Programme Evaluations and Social Experiments: Accounting For Heterogeneity in Programme Impacts," Review of Economic Studies, Oxford University Press, vol. 64(4), pages 487-535.
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  9. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, vol. 117(516), pages 1-44, 01.
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  14. Harding, Matthew & Lamarche, Carlos, 2014. "Estimating and testing a quantile regression model with interactive effects," Journal of Econometrics, Elsevier, vol. 178(P1), pages 101-113.
  15. Brewer, Mike & Duncan, Alan & Shephard, Andrew & Suarez, Maria Jose, 2006. "Did working families' tax credit work? The impact of in-work support on labour supply in Great Britain," Labour Economics, Elsevier, vol. 13(6), pages 699-720, December.
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  17. Donald B. Rubin, 1977. "Assignment to Treatment Group on the Basis of a Covariate," Journal of Educational and Behavioral Statistics, , vol. 2(1), pages 1-26, March.
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  19. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  20. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
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  22. Lamarche, Carlos, 2010. "Robust penalized quantile regression estimation for panel data," Journal of Econometrics, Elsevier, vol. 157(2), pages 396-408, August.
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