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Welfare Reform and Changes in the Economic Well-Being of Children

  • Neil G. Bennett
  • Hsien-Hen Lu
  • Younghwan Song
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    Since the implementation of the Temporary Assistance for Needy Families program in late-1996, welfare rolls have declined by more than half. This paper explores whether improvements in the economic well-being of children have accompanied this dramatic reduction in welfare participation. Further, we examine the degree to which the success or failure of welfare reform has been shared equally among families of varying educational background. We analyze data from the March Current Population Surveys over the years 1988 through 2001. Specifically, we link data for families with children who are interviewed in adjacent years and determine whether their economic circumstances either improved or deteriorated. We use two alternative approaches to address this general issue: a variety of regression models and a difference-in-differences methodology. These approaches provide consistent answers. In a bivariate framework TANF is associated with higher incomes; but this association becomes insignificant in the presence of business cycle controls. We also determine that children who were poor at an initial time period benefit differently, depending on their parents' educational attainment level. Poor children with parents who do not have a high school degree are significantly worse off in the TANF era, relative to the era prior to welfare reform, than are their more educated counterparts.

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    File URL: http://www.nber.org/papers/w9399.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9399.

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    Date of creation: Dec 2002
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    Publication status: published as Bennett, Neil G., Hsien-Hen Lu, and Younghwan Song. "Welfare Reform and Changes in the Economic Well-Being of Children." Population Research and Policy Review 23, 5-6 (Special Issue October-December 2004): 671-99.
    Handle: RePEc:nbr:nberwo:9399
    Note: CH HE
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Finis Welch, 1993. "Matching the Current Population Surveys," Stata Technical Bulletin, StataCorp LP, vol. 2(12).
    2. Paracchi, F. & Welch, F., 1992. "How Representative Are Matched Cross Sections? Evidence from the Current Population Survey," Working Papers 92-53, C.V. Starr Center for Applied Economics, New York University.
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    4. Adrian Mander & David Clayton, 2000. "Hotdeck imputation," Stata Technical Bulletin, StataCorp LP, vol. 9(51).
    5. Laura Stander Connolly, 2000. "The Effect of Welfare Reform on the Incomes and Earnings of Low-Income Families: Evidence from the Current Population Survey," JCPR Working Papers 181, Northwestern University/University of Chicago Joint Center for Poverty Research.
    6. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
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    8. Bruce D. Meyer, 1994. "Natural and Quasi- Experiments in Economics," NBER Technical Working Papers 0170, National Bureau of Economic Research, Inc.
    9. Schoeni, R.F. & Blank, R.M., 2000. "What Has Welfare Reform Accomplished? Impacts on Welfare Participation, Employment, Income, Poverty, and Family Structure," Papers 00-02, RAND - Labor and Population Program.
    10. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    11. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-42, June.
    12. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    13. N/A, 2001. "Evaluating Welfare Reform in an Era of Transition," Mathematica Policy Research Reports 1152fe95ccc24842917ed5e46, Mathematica Policy Research.
    14. Dan Lichter & Leif Jensen, 2000. "Rural America in Transition: Poverty and Welfare at the Turn of the 21st Century," JCPR Working Papers 187, Northwestern University/University of Chicago Joint Center for Poverty Research.
    15. Rebecca M. Blank, 2002. "Evaluating Welfare Reform in the United States," NBER Working Papers 8983, National Bureau of Economic Research, Inc.
    16. Brigitte C. Madrian & Lars John Lefgren, 1999. "A Note on Longitudinally Matching Current Population Survey (CPS) Respondents," NBER Technical Working Papers 0247, National Bureau of Economic Research, Inc.
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