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The Decline of Welfare Benefits in the US: The Role of Wage Inequality

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  • Robert Moffitt
  • David Ribar
  • Mark Wilhelm

Abstract

Welfare benefits in the US have experiences a much-studies 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 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 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

Suggested Citation

  • Robert Moffitt & David Ribar & Mark Wilhelm, 1998. "The Decline of Welfare Benefits in the US: The Role of Wage Inequality," Economics Working Paper Archive 373, The Johns Hopkins University,Department of Economics.
  • Handle: RePEc:jhu:papers:373
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    Citations

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    Cited by:

    1. Thomas J. Nechyba, 2001. "Social Approval, Values, and AFDC: A Reexamination of the Illegitimacy Debate," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 637-666, June.
    2. Sabatini, Fabio & Sarracino, Francesco & Yamamura, Eiji, 2014. "Social norms on rent seeking and preferences for redistribution," EconStor Preprints 98662, ZBW - German National Library of Economics.
    3. Erzo F. P. Luttmer, 2001. "Group Loyalty and the Taste for Redistribution," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 500-528, June.
    4. Laura Tach & Alicia Eads, 2015. "Trends in the Economic Consequences of Marital and Cohabitation Dissolution in the United States," Demography, Springer;Population Association of America (PAA), vol. 52(2), pages 401-432, April.
    5. Alesina, Alberto & La Ferrara, Eliana, 2005. "Preferences for redistribution in the land of opportunities," Journal of Public Economics, Elsevier, vol. 89(5-6), pages 897-931, June.
    6. Lind, Jo Thori, 2007. "Fractionalization and the size of government," Journal of Public Economics, Elsevier, vol. 91(1-2), pages 51-76, February.
    7. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
    8. Christina Fong, 2003. "Emphatic responsiveness: Evidence from a randomized experiment on giving to welfare recipients," Framed Field Experiments 00149, The Field Experiments Website.
    9. Yelowitz, Aaron S., 1998. "Why did the SSI-disabled program grow so much? Disentangling the effect of Medicaid," Journal of Health Economics, Elsevier, vol. 17(3), pages 321-349, June.
    10. Timothy Callaghan & Lawrence R. Jacobs, 2014. "Process Learning and the Implementation of Medicaid Reform," Publius: The Journal of Federalism, Oxford University Press, vol. 44(4), pages 541-563.
    11. Robert Moffitt, 1999. "Explaining Welfare Reform: Public Choice and the Labor Market," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 289-315, August.
    12. Jo Thori Lind, 2005. "Why is there so little redistribution?," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 111-125.
    13. International Monetary Fund, 2003. "Income Inequality and Redistributive Government Spending," IMF Working Papers 03/14, International Monetary Fund.
    14. Wei-Yin Hu, 1999. "Marriage and Economic Incentives: Evidence from a Welfare Experiment," JCPR Working Papers 83, Northwestern University/University of Chicago Joint Center for Poverty Research.
    15. Ho-Po Crystal Wong, 2015. "The Quantity and Quality Adjustment of Births when Having More is Not Subsidized: the Effect of the TANF Family Cap on Fertility and Birth Weight," Working Papers 15-04, Department of Economics, West Virginia University.
    16. Smith, Mark W, 1999. "Should we expect a race to the bottom in welfare benefits? Evidence from a multistate panel, 1979-1995," MPRA Paper 10125, University Library of Munich, Germany.
    17. Williamson Hoyne, Hilary, 1997. "Does welfare play any role in female headship decisions?," Journal of Public Economics, Elsevier, vol. 65(2), pages 89-117, August.
    18. Arnstein Aassve, 2003. "The impact of economic resources on premarital childbearing and subsequent marriage among young American women," Demography, Springer;Population Association of America (PAA), vol. 40(1), pages 105-126, February.
    19. Robert A. Moffitt, 1999. "Demographic Change and Public Assistance Expenditures," NBER Working Papers 6995, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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