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Markov Forecasting Methods for Welfare Caseloads

  • Jeffrey Grogger

Forecasting welfare caseloads, particularly turning points, has become more important than ever. Since welfare reform, welfare has been funded via a block grant, which means that unforeseen changes in caseloads can have important fiscal implications for states. In this paper I develop forecasts based on the theory of Markov chains. Since today's caseload is a function of the past caseload, the caseload exhibits inertia. The method exploits that inertia, basing forecasts of the future caseload on past functions of entry and exit rates. In an application to California welfare data, the method accurately predicted the late-2003 turning point roughly one year in advance.

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File URL: http://www.nber.org/papers/w11682.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11682.

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Date of creation: Oct 2005
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Publication status: published as Grogger, Jeffrey, 2007. "Markov forecasting methods for welfare caseloads," Children and Youth Services Review, Elsevier, vol. 29(7), pages 900-911, July.
Handle: RePEc:nbr:nberwo:11682
Note: LS PE
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  1. Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521355643.
  2. Jeffrey Grogger & Steven J. Haider & Jacob Alex Klerman, 2003. "Why Did the Welfare Rolls Fall During the 1990s? The Importance of Entry," Working Papers 03-07, RAND Corporation Publications Department.
  3. Jacob Alex Klerman & Steven J. Haider, 2004. "A Stock-Flow Analysis of the Welfare Caseload," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
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