Welfare Dynamics under Time Limits
Among the most important changes brought about by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) is the imposition of time limits. In this paper, we analyze a simple model in which a potential welfare recipient chooses how to allocate her time-limited endowment of benefits so as to maximize her expected lifetime utility. Not surprisingly, the model reveals that time limits provide an incentive for the consumer to conserve, or bank, her benefits. More interesting is the prediction that these incentives to conserve one's benefits vary inversely with the age of the youngest child in one's family. This implies that the reduction in welfare payments that results from PRWORA will fall disproportionately on families with young children. We estimate age group-specific effects of time limits and test the prediction of the model using data from a welfare reform demonstration in Florida. Subject to some assumptions that are necessary to distinguish the effects of time limits from the effects of other provisions of the demonstration, we find that time limits indeed reduce welfare use by the greatest amount among the families with the youngest children. Moreover, time limits have substantial effects on welfare utilization, reducing monthly utilization probabilities by 19 percent. Time limits lead families to exit the welfare rolls well before they exhaust their benefits, suggesting that welfare mothers are rational in the sense of being forward-looking.
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|Date of creation:||01 Jan 2000|
|Contact details of provider:|| Postal: Harris Graduate School of Public Policy Studies, 1155 E. 60th Street Chicago, IL 60637|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- Christopher A. Swann, 2005.
"Welfare Reform When Recipients Are Forward-Looking,"
Journal of Human Resources,
University of Wisconsin Press, vol. 40(1).
- Christopher A. Swann, 2004. "Welfare Reform when Recipients are Forward-Looking," Department of Economics Working Papers 04-04, Stony Brook University, Department of Economics.
- Kornfeld, Robert & Bloom, Howard S, 1999. "Measuring Program Impacts on Earnings and Employment: Do Unemployment Insurance Wage Reports from Employers Agree with Surveys of Individuals?," Journal of Labor Economics, University of Chicago Press, vol. 17(1), pages 168-197, January.
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- 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.
- Jeff Grogger & Charles Michalopoulos, 1999. "Welfare Dynamics Under Time Limits," NBER Working Papers 7353, National Bureau of Economic Research, Inc.
- Jeff Grogger & Charles Michalopoulos, 2000. "Welfare Dynamics under Time Limits," JCPR Working Papers 125, Northwestern University/University of Chicago Joint Center for Poverty Research.
- J. P. Ziliak & D. N. Figlio & E. E. Davis & L. S. Connolly, "undated". "Accounting for the Decline in AFDC Caseloads: Welfare Reform or Economic Growth?," Institute for Research on Poverty Discussion Papers 1151-97, University of Wisconsin Institute for Research on Poverty.
- Rebecca M. Blank, 2001. "What Causes Public Assistance Caseloads to Grow?," Journal of Human Resources, University of Wisconsin Press, vol. 36(1), pages 85-118.
- Rebecca M. Blank, 1997. "What Causes Public Assistance Caseloads to Grow?," NBER Working Papers 6343, National Bureau of Economic Research, Inc.
- Rebecca M. Blank, 2000. "What Causes Public Assistance Caseloads to Grow?," JCPR Working Papers 18, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Rosenzweig, Mark R & Wolpin, Kenneth I, 1994. "Parental and Public Transfers to Young Women and Their Children," American Economic Review, American Economic Association, vol. 84(5), pages 1195-1212, December.
- Schoeni, R-F, 1996. "Does Aid to Families with Dependent Children Displace Familial Assistance?," Papers 96-12, RAND - Labor and Population Program.
- Greg J. Duncan & Kathleen Mullan Harris & Johanne Boisjoly, "undated". "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.
- Greg Duncan & Kathleen Mullan Harris & Johanne Boisjoly, 1997. "Time Limits and Welfare Reform: New Estimates of the Number and Characteristics of Affected Families," JCPR Working Papers 1, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Shelly J. Lundberg & Robert A. Pollak & Terence J. Wales, 1997. "Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit," Journal of Human Resources, University of Wisconsin Press, vol. 32(3), pages 463-480.
- James P. Ziliak & David N. Figlio & Elizabeth E. Davis & Laura S. Connolly, 2000. "Accounting for the Decline in AFDC Caseloads: Welfare Reform or the Economy?," Journal of Human Resources, University of Wisconsin Press, vol. 35(3), pages 570-586.
- Rebecca M. Blank, 1999. "What Goes Up Must Come Down? Explaining Recent Changes in Public Assistance Caseloads," JCPR Working Papers 78, Northwestern University/University of Chicago Joint Center for Poverty Research. Full references (including those not matched with items on IDEAS)
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