The Effect of Child Support Enforcement on Noncustodial Fathers' Participation in the Underground Economy

The major aims of the proposed research will be to 1) understand the major factors related to unmarried fathers' decisions about work in the underground and regular economies, and 2) begin a preliminary analysis of the extent to which child support enforcement in the U.S. results in the increased participation of unmarried fathers in the underground economy. The analyses will be based on data from the recently commenced Fragile Families Study, which will follow a new birth cohort of children born in 20 large American cities stratified by different labor market conditions and varying welfare and child support policy regimes. Among other things, the Fragile Families Study is designed to provide previously unavailable information on the economic and social conditions of unwed fathers, and factors that encourage and discourage fathers' involvement in their children's lives. The proposed research will be based on baseline data from the first seven cities in the study (Oakland, Austin, Newark, Philadelphia, Richmond, Baltimore and Detroit), as well as the second wave of data from Oakland and Austin. The theoretical framework underlying the analysis will be based on models employed in the literature on the effect of taxes on labor supply. I will first use the baseline data in order to model participation in the underground as a function of wages available in the regular economy, wages in the informal economy, and other variables. The method of estimation employed will be maximum likelihood. I will then use the baseline and year two data from the cities of Oakland and Austin in an attempt to discern whether the enforcement of child support orders encourages greater participation and increased hours of work in the underground sector. In order to take full advantage of all of the data generated by the survey several estimation techniques will be employed, including instrumental variables and fixed effects models. Preliminary Draft - Final Draft Due August 31