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Welfare Reform when Recipients are Forward-Looking

In 1996 the Aid to Families with Dependent Children program was replaced with the Temporary Assistance for Needy Families (TANF) program. This paper considers the effects of two specific components of TANF, time limits and work requirements, on employment, marriage, and welfare participation. I use a discrete-choice dynamic programming model and obtain parameter estimates using data from the Panel Study of Income Dynamics. Policy simulations show that a five-year lifetime time limit results in a 60 percent reduction in welfare use and that a substantial part of this reduction occurs because recipients are forward-looking.

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File URL: http://www.stonybrook.edu/commcms/economics/research/papers/2004/04-04.pdf
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Paper provided by Stony Brook University, Department of Economics in its series Department of Economics Working Papers with number 04-04.

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Date of creation: 2004
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Handle: RePEc:nys:sunysb:04-04
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Web page: http://www.stonybrook.edu/commcms/economics/
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  1. Thomas Fraker & Robert Moffitt & Douglas Wolf, 1985. "Effective Tax Rates and Guarantees in the AFDC Program, 1967-1982," Journal of Human Resources, University of Wisconsin Press, vol. 20(2), pages 251-263.
  2. Michael P. Keane, 1995. "A new idea for welfare reform," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 2-28.
  3. van der Klaauw, Wilbert, 1996. "Female Labour Supply and Marital Status Decisions: A Life-Cycle Model," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 199-235, April.
  4. Miller, Robert A. & Sanders, Seth G., 1997. "Human capital development and welfare participation," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 1-43, June.
  5. Jeffrey Grogger & Charles Michalopoulos, 2003. "Welfare Dynamics under Time Limits," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 530-554, June.
  6. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  7. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  8. Berkovec, James & Stern, Steven, 1991. "Job Exit Behavior of Older Men," Econometrica, Econometric Society, vol. 59(1), pages 189-210, January.
  9. Steven Stern & Michael J. Brien & Lee A. Lillard, 1999. "Cohabitation, Marriage, and Divorce in a Model of Match Quality," Virginia Economics Online Papers 322, University of Virginia, Department of Economics.
  10. Robert A. Moffitt & LaDonna Pavetti, 1999. "Time Limits," JCPR Working Papers 91, Northwestern University/University of Chicago Joint Center for Poverty Research.
  11. Michael P. Keane & Kenneth I. Wolpin, 1995. "The career decisions of young men," Working Papers 559, Federal Reserve Bank of Minneapolis.
  12. Hilary Hoynes, 1993. "Welfare Transfers in Two-Parent Families: Labor Supply and Welfare Participation Under AFDC-UP," NBER Working Papers 4407, National Bureau of Economic Research, Inc.
  13. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  14. Blank, Rebecca M., 1989. "Analyzing the length of welfare spells," Journal of Public Economics, Elsevier, vol. 39(3), pages 245-273, August.
  15. Terra McKinnish & Seth Sanders & Jeffrey Smith, 1999. "Estimates of Effective Guarantees and Tax Rates in the AFDC Program for the Post-OBRA Period," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 312-345.
  16. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
  17. Greg J. Duncan & Kathleen Mullan Harris & Johanne Boisjoly, . "Time Limits and Welfare Reform: New Estimates of the Number and Characteristics of Affected Families," IPR working papers 97-3, Institute for Policy Resarch at Northwestern University.
  18. Stinebrickner, Todd R, 2001. "Compensation Policies and Teacher Decisions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 751-79, August.
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