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Impacts of Eligibility Expansions and Provider Reimbursement Rate Increases on Child Care Subsidy Take-Up Rates, Welfare Use and Work

  • Ann Dryden Witte
  • Magaly Queralt
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    We find that reforms in the Rhode Island subsidized child care program, including income and age eligibility expansions and increases in the reimbursement rates paid to formal providers, significantly increased the likelihood that current and former welfare families: a) would use child care subsidies and b) would work 20 or more hours per week. In addition, these policy changes significantly increased the probability that family heads of household would leave welfare for work. The most powerful impact of the Rhode Island changes in child care policies was on families that had left welfare (i.e., former cash recipients) and that worked at least 20 hours per week. These policy changes had less effect on families receiving cash assistance and enrolled in some approved activity (e.g., education or training) other than work. We were not able to assess the impact of the Rhode Island policy changes on families who were never on cash assistance. However, the large increase in the number of such families receiving child care subsidies after the reforms were instituted suggests that the impact may have been substantial. We also estimate that Rhode Island's reform of its cash assistance program and of its child care subsidy program, in combination, almost tripled the probability that a typical head of household currently or formerly receiving welfare would work 20 or more hours per week (i.e., the probability increased from 7% in the second quarter of 1996 to 22% in the second quarter of 2000) and almost halved the probability that a single mother in the sample would be on cash assistance and neither working nor in some other approved activity (i.e., such probability decreased from 47% in the second quarter of 1996 to 25% in the second quarter of 2000).

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    File URL: http://www.nber.org/papers/w9693.pdf
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    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9693.

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    Date of creation: May 2003
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    Handle: RePEc:nbr:nberwo:9693
    Note: LS PE CH
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    1. Ann Dryden Witte & Magaly Queralt, 2002. "Take-Up Rates and Trade Offs After the Age of Entitlement: Some Thoughts and Empirical Evidence for Child Care Subsidies," NBER Working Papers 8886, National Bureau of Economic Research, Inc.
    2. Robert J. Lemke & Ann Dryden Witte & Magaly Queralt & Robert Witt, 2000. "Child Care and the Welfare to Work Transition," NBER Working Papers 7583, National Bureau of Economic Research, Inc.
    3. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 913-37, August.
    4. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
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