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Why Welfare Caseloads Fluctuate: A Review of Research on AFDC, SSI, and the Food Stamps Program

  • Susan E Mayer

This report reviews research on trends in the caseloads of three means-tested transfer programs in the United States: Aid to Families with Dependent Children (AFDC), Supplemental Security Income (SSI), and the Food Stamp Program (FSP). Trends in caseloads are the result of 1) program parameters and interactions between programs, 2) economic conditions, 3) norms and values, and 4) demographic characteristics. Most research tries to estimate the relative importance of the first two. The research suggests that all else equal, as welfare programs become more generous and easier to get caseloads increase. Caseload changes are also greatest when two or more of these four factors provide similar incentives for people to alter their behavior. For example, recent declines in AFDC and the FSP caseloads appear to be the result of the combined effect of the strong U.S. economy and policy changes that made work more available and more attractive compared to welfare. Similarly, program interactions are important. When programs provide opposing incentives, they reduce the behavioral response to either incentive, and when programs provide similar incentives, the behavioral response is greater than if only one program provided the incentive. Finally, incentives do not affect everyone in the same way. Program changes that benefit some recipients may hurt others. The research on caseloads has many limitations that reduce confidence in these estimated effects. The research is almost all based on reduced-form models, which tell us little about the causal mechanisms through which exogenous factors affect caseloads. The theory about these causal mechanisms is weak resulting in the possibility of mis-specification and many key variables are poorly measured or omitted.

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File URL: http://www.treasury.govt.nz/publications/research-policy/wp/2000/00-07/twp00-07.pdf
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Paper provided by New Zealand Treasury in its series Treasury Working Paper Series with number 00/07.

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Length: 131 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:nzt:nztwps:00/07
Contact details of provider: Postal: New Zealand Treasury, PO Box 3724, Wellington, New Zealand
Phone: +64-4-472 2733
Fax: +64-4-473 0982
Web page: http://www.treasury.govt.nz
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