Deter and Deteriorate: The Effects of Application Processing Times on Welfare Receipt and Employment

This paper investigates the effects of application processing times on welfare applicants’ benefit and employment outcomes. For causal inference, we exploit exogenous variation in application processing times stemming from the random assignment of caseworkers. Our findings indicate that longer application processing times deter applicants from receiving benefits, particularly those with better labor market prospects. In contrast, for applicants who eventually receive benefits, longer processing times reduce labor market attachment and increase benefit dependency. Finally, using exogenous variation in caseworkers’ provision of benefit prepayments, we find that the receipt of welfare prepayments increases the employment and earnings of awarded applicants. This suggests that reduced financial stress improves successful job search.